BlackRock Fined $2.5M by SEC for Misleading Investment Information

BlackRock Fined $2.5M by SEC for Misleading Investment Information – The Securities and Exchange Commission (SEC) has revealed that it is taking legal action against BlackRock, a prominent global investment management firm, for providing investors with misleading information about its involvement in the entertainment industry. 

The SEC discovered that BlackRock omitted important details about the risks associated with its investments, ultimately causing investors to make decisions without having the full picture. In a settlement, BlackRock has consented to pay a $2.5 million penalty to address the allegations. In a press release dated October 24, the SEC disclosed its charges against BlackRock for providing investors with misleading information regarding substantial investments in the entertainment sector. 

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These investments were associated with the BlackRock Multi-Sector Income Trust (BIT), a publicly traded fund under BlackRock’s guidance. Under the terms of a settlement, the company agreed to pay a $2.5 million penalty. The SEC’s investigation uncovered that between 2015 and 2019, BIT had made significant investments in Aviron Group, LLC, a company primarily engaged in creating print and advertising campaigns for one to two films annually.

BlackRock’s public documents filed with the SEC inaccurately represented Aviron as a “Diversified Financial Services” company. These inaccuracies appeared in multiple annual and semi-annual reports publicly available to investors. “Accurate disclosures of a closed-end or mutual fund’s portfolio are crucial for retail and institutional investors to evaluate their investment decisions,” stated Andrew Dean, Co-Chief of the SEC’s Enforcement Division’s Asset Management Unit. 

He emphasized that investment advisers should provide this vital information, noting that BlackRock failed to do so regarding the Aviron investment. Furthermore, the SEC determined that BlackRock had exaggerated the interest rate being paid by Aviron, compounding the misguidance to investors. In 2019, BlackRock rectified these inaccuracies, amending its reports to provide a precise depiction of Aviron’s industry and interest rate.

BlackRock has consented to the SEC’s order, which determined that it violated both the Investment Advisers Act of 1940 and the Investment Company Act of 1940. In addition to the financial penalty, BlackRock has agreed to a cease-and-desist order and censure, without admitting or denying the SEC’s findings. Concurrently, in 2020, the SEC had previously filed charges against William Sadleir, the founder of Aviron. 

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He was accused of misappropriating BIT funds that were invested in his company. The SEC alleged that he fraudulently obtained at least $13.8 million from the $75 million investment made by BlackRock Multi-Sector Income Trust, the primary investor in Aviron. Sadleir then proceeded to use the misappropriated funds for personal and business expenses. However, the case against Sadleir has since been resolved.

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