The SEC charged BlackRock Advisors with inaccurately characterizing entertainment investments in publicly traded funds.
The U.S. Securities and Exchange Commission (SEC) announced that it has charged BlackRock, one of the world’s largest investment managers, with misleading investors by inaccurately describing its investments in the entertainment sector.
The agency found that BlackRock failed to disclose certain risks associated with its investments, causing investors to make decisions based on incomplete information. As part of the settlement, the financial giant agreed to pay a $2.5 million fine to resolve the charges.
SEC accuses BlackRock of misleading investors
In a press release on October 24, the SEC announced charges that BlackRock misled investors and failed to accurately describe significant investments in the entertainment industry.
The investments were part of the BlackRock Multi-Sector Income Trust (BIT), a publicly traded fund advised by the giant. In the settlement, the company agreed to pay a $2.5 million fine.
The SEC’s investigation revealed that from 2015 to 2019, BIT made significant investments in Aviron Group, LLC, a company focused on developing print and advertising plans for one to two motion pictures per year.
BlackRock’s public filings with the U.S. Securities and Exchange Commission incorrectly described Aviron as a “diversified financial services” company. These inaccuracies appeared in multiple annual and semi-annual reports disclosed to investors.
“Accurate disclosure of the portfolio of a closed-end fund or mutual fund is critical for retail and institutional investors to evaluate their investment decisions,” said Andrew Dean, co-chief of the SEC Enforcement Division’s Asset Management Unit. He emphasized that investment advisers should provide this important information and noted that BlackRock failed to do so with respect to the Aviron investment.
In addition, the SEC found that BlackRock had further misled investors by overstating the interest rates paid by Aviron. BlackRock corrected these errors in 2019, revising its reports to accurately describe Aviron’s industry and interest rates.
BlackRock agrees to cease and desist order
BlackRock consented to the SEC’s order, which found that it violated the Investment Advisers Act of 1940 and the Investment Company Act of 1940. In addition to the fine, BlackRock agreed to a cease-and-desist order and censure without admitting or denying the SEC’s findings.
Meanwhile, the SEC previously filed charges against Aviron founder William Sadleir in 2020. Sadleir was accused of misappropriating BIT funds invested in his company.
According to the agency, he defrauded Aviron's main investor, BlackRock Multi-Sector Income Trust, of at least $13.8 million of its $75 million investment. He then began misusing the misappropriated funds for personal and business expenses. However, the lawsuit against Sadleir has now been settled. #BlackRock #SEC