The SEC recently announced a settlement with Bloomberg Finance L.P. (“Bloomberg”) in regard to civil charges accusing the company of providing misleading disclosures relating to its paid subscription service, BVAL. BVAL provides daily price valuations for fixed-income securities.
The SEC found that from, at least 2016 through October 2022, Bloomberg failed to disclose that valuations for certain fixed-income securities could be based on a single input rather than proprietary algorithmic methodologies it had previously disclosed. It was revealed that some of the prices were based on a single data input such as an individual broker quote. The SEC announced that Bloomberg was aware that some customers such as mutual funds may utilize BVAL to determine fund asset valuations. As a result, BVAL may have had an impact on the price of certain securities. Without admitting or denying the findings, Bloomberg agreed to pay a $5 million penalty for misleading disclosures relating to BVAL.
The SEC continues to hold service providers accountable for misrepresentations that affect investors. While these allegations speak broadly to the importance of accurate and complete disclosures, the more pertinent element to investment advisers is the implication for firms’ vendor oversight policies and procedures. It is not enough for advisers to establish adequate vendor oversight policies and procedures. However, advisers must ensure that their contracted vendors are fulfilling not only the contractual obligations but also the obligations to the investors. As part of the adviser’s fiduciary duty, it is imperative that they conduct due diligence prior to engaging a service provider. Additionally, the SEC has proposed requirements for periodic monitoring to reassess and revaluate adviser’s third party vendors.
The SEC3 compliance consulting team can assist with not only establishing reasonably designed vendor oversight policies and procedures, but also provide assistance in performing your vendor due diligence. For more information, please contact us at info@seccc.com, at (212) 706-4029 or visit us on our website at www.seccc.com.
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For over two decades, we have been providing compliance consulting services and servicing as outsourced Chief Compliance Officers. Our professionals have served as SEC regulators and in senior leadership, guiding the industry’s principal compliance association. Our consultants also have hands-on industry experience as chief compliance officers, experienced securities attorneys and senior management of investment advisers, broker-dealers and fund administrators.
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SEC3 offers an extensive suite of customizable compliance services for investment advisers, private fund advisers, CPOs, CTAs, investment companies, institutional investors and broker-dealers which can complement your internal compliance program on a one-time or recurring basis depending on your needs.
Call us today at (212) 706-4029 x 229, or shoot us an email at info@SEC3compliance.com so we can set up a time for one of our consultants to discuss your needs and how we can help.
