BlackRock to pay $2.5 mln fine to settle SEC charges over Investment Fund Disclosures

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Key Takeaways 

  • SEC alleges that BlackRock failed to provide accurate information about its investments in Aviron Group to both retail and institutional investors. 
  • As part of this settlement, BlackRock has agreed to pay a substantial $2.5 million penalty

In a recent development, the U.S. Securities and Exchange Commission (SEC) has taken action against BlackRock Advisors LLC (BLK.N), charging them with inaccurate descriptions of investments within the entertainment industry.ย 

As part of this settlement, BlackRock has agreed to pay a substantial $2.5 million penalty. The allegations stem from the period between 2015 and 2019 when one of BlackRock’s trusts, the BlackRock Multi-Sector Income Trust (BIT), made notable investments in Aviron Group LLC, a company primarily involved in developing advertising plans for films.

According to the SEC, BlackRock failed to provide accurate information about its investments in Aviron Group to both retail and institutional investors.ย  The misrepresentation involved describing Aviron as a provider of “Diversified Financial Services” in various public reports, leading investors to believe its business scope was different from reality.ย 

Additionally, BlackRock incorrectly stated Aviron’s interest rate, making it appear higher than it actually was. The enforcement division of the SEC, led by Andrew Dean, stressed the importance of accurate disclosures in fund portfolios. 

He stated that both retail and institutional investors rely on these disclosures and emphasized that BlackRock had not met this vital obligation in the case of the Aviron investment. 

However, it’s worth noting that BlackRock did take corrective action in 2019 upon discovering these errors and subsequently rectified the information regarding Aviron’s investment in the following years. The $2.5 million penalty is part of the agreement to settle the charges brought against them.

In addition to the regulatory action against BlackRock, the SEC’s recent actions have coincided with noteworthy developments related to cryptocurrency investment. The SEC recently reported that BlackRock’s proposed Bitcoin exchange-traded fund (ETF) had been added to a clearing-house eligibility file in August.ย 

The clearing house, known as the Depository Trust & Clearing Corporation (DTCC), specified that the listing of BlackRock’s iShares Bitcoin Trust ETF on their eligibility file was a standard practice undertaken in preparation for launching a new ETF.ย 

This list comprises both active and potential ETFs, and its purpose is to facilitate a smooth transition when ETFs are ready for market introduction. While the inclusion of the iShares Bitcoin Trust ETF on the DTCC’s list is a positive step in the ETF’s development, it does not automatically signal regulatory approval

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Saniya Raahath
Saniya Raahath

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