Bloomberg Fined $5 Million by SEC for Brokerage Practices

An agency broker under Bloomberg LP was fined $5 million by the US Securities and Exchange Commission (SEC) for allegedly allowing unaffiliated broker/dealers to execute low-commission trades.

For about eight years, Bloomberg Tradebook transferred orders from customers who paid lower fees to three third-party broker/dealers, the securities regulator said Wednesday. The practice was internally called a “Low Cost Router.”

About 6.4 million client orders were affected, including many “immediate or cancel” orders, which are meant to be executed without delay, the SEC said.

Tradebook allegedly also did not disclose verifiable execution venue information, which investors use to make strategic choices, for at least 1 million customer orders.

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The US securities regulator charged the agency broker with making misrepresentations about its buy-sell service, which it said allowed clients to think all their orders were filled by Tradebook’s “advanced” technology.

“Contrary to representations in its marketing materials, Tradebook let unaffiliated brokers make decisions about the routing of certain customer trade orders in a way that lowered Tradebook’s costs,” Joseph Sansone, market abuse unit chief in the enforcement division, said in a statement.

“Broker/dealers must take care to provide customers with accurate and up-to-date information about important features of their order routing services,” Sansone added.

Bloomberg LP did not immediately respond to requests for comment.

Bloomberg Tradebook settled with the securities regulator, neither admitting nor denying the charges.

The fine is about a relative pittance for the parent company, Bloomberg LP. Though the firm does not disclose its financials, it is expected to have generated about $10 billion annually in revenues in 2018, according to an analysis from Burton-Taylor International Consulting.

Its founder, Michael Bloomberg, who owns about 88% of the company, is the 16th richest person in the world, according to a Forbes’ ranking, with an estimated net worth of $56 billion.