BlackRock, the world’s largest asset manager, has been charged by the Securities and Exchange Commission (SEC) for failing to accurately report significant investments made by a publicly traded fund it advised. According to the SEC’s order, released on October 24, 2023, BlackRock Multi-Sector Income Trust (BIT) mischaracterized its substantial investments in Aviron Group, LLC, a company that developed print and advertising plans for one to two films per year. BlackRock reportedly described Aviron as a “Diversified Financial Services” entity in several of BIT’s annual and semi-annual reports, even though it played a significant role in the fund’s portfolio. Moreover, BlackRock allegedly claimed that Aviron paid a higher interest rate than was actually the case. The discrepancies were identified by BlackRock in 2019, and the investment in Aviron was accurately reported in subsequent documents.
BlackRock has agreed to pay a $2.5 million penalty to settle the charges without admitting or denying the SEC’s findings. The SEC’s investigation was conducted by Salvatore Massa and Brian Fitzpatrick under the supervision of Andrew Dean and Corey Schuster, all with the Enforcement Division’s Asset Management Unit. In a statement, Andrew Dean, Co-Chief of the Enforcement Division’s Asset Management Unit, said, “Retail and institutional investors rely on accurate disclosures of the companies that make up a closed-end or mutual fund’s portfolio to evaluate a current or prospective investment in the fund. Investment advisers are obligated to provide this crucial information.”
The disclosure scandal highlights the importance of transparency in investment advising, especially as institutional interest in the crypto space continues to grow. While the legal issue may be a setback for BlackRock, it is unlikely to dampen the overall enthusiasm for Bitcoin and the potential launch of a spot ETF, which many hope will open new avenues for institutional involvement in the crypto landscape.
