Fund managers often rely on pricing services for valuing thinly traded securities. The SEC recently sent a shot across the bow of pricing service providers in a settled enforcement proceeding against Bloomberg Finance L.P. (Bloomberg), a subsidiary of privately held Bloomberg L.P., which offers a pricing service known as BVAL. The SEC alleged that Bloomberg violated the antifraud provisions of the Securities Act of 1933 because it made material misstatements about BVAL’s methodologies. The SEC acknowledged, however, that BVAL’s deviations from its disclosed methodologies were rare. Moreover, it did not allege that the prices themselves were misleading. Commissioners Hester M. Peirce and Mark T. Uyeda opposed the proceeding on the grounds that the alleged misrepresentations were not made in connection with the offer or sale of securities. This article details the SEC’s allegations, the settlement’s terms and the Peirce/Uyeda dissenting statement. See “HFLR Program Explores Valuation of Illiquid Assets and Valuation Governance
” (Jan. 28, 2021); “Is the Use of an Independent Valuation Firm Superior to a Manager’s Internal Valuation Process?
” (Apr. 23, 2015); and “DLA Piper Hedge Fund Valuation Webinar Covers Fair Value Methodologies, Valuation Services, Valuing Illiquid Positions and Handling Valuation Inquiries During SEC Examinations
” (Aug. 7, 2013).