SEC Fines BlackRock $2.5 Million For Inaccurate Investment Disclosures

• The SEC fined BlackRock Inc. $2.5 million for inaccurate disclosures about a fund’s investments from 2015 to 2019.
• BlackRock’s Multi-Sector Income Trust (BIT) provided significant loans to Aviron Group but wrongly categorized them as “Diversified Financial Services” in public filings.
• The SEC alleges that BlackRock also overstated the interest rate earned on the Aviron loans.

The U.S. Securities and Exchange Commission (SEC) has fined investment management giant BlackRock Inc. $2.5 million for inaccurate disclosures regarding a fund’s investments between 2015 and 2019.

According to the SEC, BlackRock’s Multi-Sector Income Trust (BIT) made sizeable loans to entertainment company Aviron Group but improperly classified the position as “Diversified Financial Services” in public filings. The SEC alleges BlackRock also misstated the interest rate earned on the Aviron loans as higher than actual rates.

BlackRock self-reported and corrected the errors

BlackRock self-reported the disclosure errors in 2019 and corrected the information in subsequent filings. The firm agreed to settle with the SEC and pay the $2.5 million penalty without admitting or denying the findings.

Andrew Dean of the SEC’s Asset Management Division noted that investment advisors have an obligation to provide accurate information on the assets they manage. In this case, he said BlackRock “failed to do so” for the Aviron investment.

The charges come even as BlackRock pursues approval for a Bitcoin exchange-traded fund (ETF), amplifying scrutiny of the asset giant. Earlier this week, BlackRock’s proposed Bitcoin ETF was noticed on the DTCC registry, boosting expectations of an imminent SEC ruling.

Some industry observers argue the simultaneous timing of the fine and ETF listing is no coincidence. They contend the SEC may be flexing its oversight muscles with the penalty before approving BlackRock’s landmark crypto product.

Regardless of motives, the disclosure violation highlights how traditional finance giants like BlackRock are not immune to periods of regulatory lapses. As it wades deeper into the crypto sector, BlackRock will need to maintain compliance rigor to uphold its sterling reputation.