The US Securities and Exchange Commission (SEC ) has fined Bloomberg LP $5 million for allegedly failing to make certain disclosures to customers with regards to BVAL, its paid subscription product which provides daily price valuations for fixed-income securities. The securities regulator disclosed the fine in a statement released on Monday.

According to the SEC, between at least 2016 and October last year, the data and media company did not inform its BVAL subscribers that its valuations for certain fixed-income securities could be based on a single data input, such as a broker quote. The SEC said this is problematic because such a source does not align with the methodologies the company had previously disclosed to its customers.

Additionally, the SEC explained that Bloomberg did not disclose the data despite knowing that clients such as mutual funds may depend on the BVAL price valuations when calculating the value of their assets. Moreover, they are likely to value their investments in government, supranational, agency and corporate and municipal bonds as well as securitized products using BVAL’s data, the regulator added.

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Bloomberg Agrees to Settle without Admitting or Denying

According to the SEC, the purposes for which Bloomberg's BVAL are deployed means that the paid subscription service prices can influence the offered or traded securities prices. As a result of this “misleading disclosure,” Bloomberg violated sections 17(a) (2) of the United States Securities Act.

The regulator noted that Bloomberg has agreed to pay the fine without admitting or denying its charges. On top of that, the company has pledged to avoid future violations of the Act. In addition, Bloomberg voluntarily took remedial efforts to improve its BVAL service, the regulator said.

Osman Nawaz, the Chief of the SEC's Division of Enforcement's Complex Financial Instruments Unit, explained that because Bloomberg and other pricing services providers play a critical role in the fixed-income markets, they must always provide accurate information about their valuation process to their customers.