The U.S. Securities and Exchange Commission (SEC) has taken action against BlackRock Advisors, LLC, an investment advisory firm, for not correctly detailing investments in the entertainment sector that formed a significant part of a fund it managed, which was publicly traded. BlackRock has conceded to settle these charges with a fine of $2.5 million without admitting or denying the SEC’s determinations.
According to the SEC’s documentation, between 2015 and 2019, the BlackRock Multi-Sector Income Trust (BIT) heavily invested in Aviron Group, LLC via a lending facility. Aviron Group specializes in devising print and marketing campaigns for one to two movies annually. However, the SEC highlighted that BlackRock misrepresented Aviron in many of BIT‘s yearly and bi-annual reports that were public and filed with the SEC, labeling Aviron as a “Diversified Financial Services” entity.
The SEC also discovered that BlackRock indicated a higher interest rate from Aviron than what was genuinely applicable. By 2019, BlackRock rectified these discrepancies, providing accurate reporting on the Aviron investment in subsequent reports.
Andrew Dean, who co-heads the Enforcement Division’s Asset Management Unit at the SEC, emphasized the importance of precise company disclosures in a fund’s portfolio for both retail and institutional investors evaluating potential or current fund investments. He pointed out that investment advisors are duty-bound to offer this crucial information, and BlackRock‘s representation of the Aviron investment fell short of this standard.
BlackRock has agreed to the SEC’s terms, which found the firm in violation of the Investment Advisers Act of 1940 and the Investment Company Act of 1940. While not admitting or denying the SEC’s determinations, BlackRock has consented to a censure and a cease-and-desist order in addition to the financial penalty.
It’s worth noting that the SEC had earlier taken action against William Sadleir, Aviron‘s founder, for misappropriating funds from BIT that were invested in Aviron. This matter has since been settled.
