My excellent shop, Bavarian Professionals of Berkeley, CA says it is probably caused by two contributing factors-
carbon buildup in the head and deterioration of the fuel quality in CA (Now only 91, tops.).
I have searched the archives and found advice that running the engine at 4K on the highway for a couple of minutes might help clean it out. Also a cleaning type fuel additive, Lubro-Moly ventil Sauber, and a cleaning process using GM Top Engine Cleaner.
It is apparent quite a few 535i owners have had this problem.
Has anyone found a solution?