Taking Broad View of Omission Liability, SEC Settles Enforcement Action Against Pricing Service Provider
On January 23, 2023, the SEC announced the settlement of administrative proceedings brought against Bloomberg Finance L.P., a privately held financial, software, data and media company, for alleged violations of Section 17(a)(2) of the Securities Act of 1933, which provides for liability for material misstatements and omissions in the offer or sale of securities. Bloomberg’s alleged materially misleading omission was its apparent failure to disclose to customers of its independent pricing service, BVAL, that valuations for certain thinly-traded fixed-income securities could, in certain circumstances, be largely driven by a single data input, such as a broker quote. According to the SEC’s order, since BVAL’s customers include mutual funds, asset managers and hedge funds, which may use BVAL’s prices when valuing fixed income positions and making offers and sales of securities, Bloomberg’s alleged omission about its valuation methodologies “impacted offers and sales of certain securities … in violation of Section 17(a)(2) of the Securities Act.” Finding the foregoing reasoning to be flawed, Commissioners Hester M. Peirce and Mark T. Uyeda issued a statement objecting to the enforcement action and expressing the view that the statements at issue were not made in the offer or sale of securities.
Without admitting or denying the charges, Bloomberg agreed, in settlement of the charges, to pay a civil monetary penalty in the amount of $5,000,000 and to cease and desist from future violations of Section 17(a)(2). The SEC’s order notes that Bloomberg’s remedial efforts, including its voluntary retention of an outside expert and publication of additional disclosures regarding its valuation methodologies, were considered by the SEC in determining to accept the settlement offer.
In an accompanying press release, Osman Nawaz, Chief of the Division of Enforcement’s Complex Financial Instruments Unit stated, “[t]his matter underscores that we will hold service providers, such as Bloomberg, accountable for misrepresentations that impact investors.”
The SEC’s administrative order is available here and the accompanying press release is available here. The statement of Commissioners Peirce and Uyeda is available here.
Vedder Thinking | Articles Taking Broad View of Omission Liability, SEC Settles Enforcement Action Against Pricing Service Provider
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February 8, 2023
On January 23, 2023, the SEC announced the settlement of administrative proceedings brought against Bloomberg Finance L.P., a privately held financial, software, data and media company, for alleged violations of Section 17(a)(2) of the Securities Act of 1933, which provides for liability for material misstatements and omissions in the offer or sale of securities. Bloomberg’s alleged materially misleading omission was its apparent failure to disclose to customers of its independent pricing service, BVAL, that valuations for certain thinly-traded fixed-income securities could, in certain circumstances, be largely driven by a single data input, such as a broker quote. According to the SEC’s order, since BVAL’s customers include mutual funds, asset managers and hedge funds, which may use BVAL’s prices when valuing fixed income positions and making offers and sales of securities, Bloomberg’s alleged omission about its valuation methodologies “impacted offers and sales of certain securities … in violation of Section 17(a)(2) of the Securities Act.” Finding the foregoing reasoning to be flawed, Commissioners Hester M. Peirce and Mark T. Uyeda issued a statement objecting to the enforcement action and expressing the view that the statements at issue were not made in the offer or sale of securities.
Without admitting or denying the charges, Bloomberg agreed, in settlement of the charges, to pay a civil monetary penalty in the amount of $5,000,000 and to cease and desist from future violations of Section 17(a)(2). The SEC’s order notes that Bloomberg’s remedial efforts, including its voluntary retention of an outside expert and publication of additional disclosures regarding its valuation methodologies, were considered by the SEC in determining to accept the settlement offer.
In an accompanying press release, Osman Nawaz, Chief of the Division of Enforcement’s Complex Financial Instruments Unit stated, “[t]his matter underscores that we will hold service providers, such as Bloomberg, accountable for misrepresentations that impact investors.”
The SEC’s administrative order is available here and the accompanying press release is available here. The statement of Commissioners Peirce and Uyeda is available here.
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