SEC Charges BlackRock with Failing to Properly Disclose Investments by Publicly Traded Fund it Advised

The Securities and Exchange Commission today charged BlackRock Advisors, LLC, an investment adviser, for failing to accurately describe investments in the entertainment industry that comprised a significant portion of a publicly traded fund it advised. To settle the charges, BlackRock agreed to pay a $2.5 million penalty.

The SEC’s order finds that, from 2015 to 2019, BlackRock Multi-Sector Income Trust (BIT) made significant investments, through a lending facility, in Aviron Group, LLC, a company that developed print and advertising plans for one to two films per year. According to the SEC’s order, in many of BIT’s annual and semi-annual reports that were publicly available to investors and filed with the SEC, BlackRock inaccurately described Aviron as a “Diversified Financial Services” company. The SEC’s order also finds that BlackRock stated that Aviron paid a higher interest rate than was actually the case. In 2019, BlackRock identified these inaccuracies and BIT accurately reported the Aviron investment in reports going forward.

“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,” said Andrew Dean, Co-Chief of the Enforcement Division’s Asset Management Unit. “Investment advisers have a responsibility to provide this vital information, and BlackRock failed to do so with the Aviron investment.”

BlackRock consented to the entry of the SEC’s order finding that it violated the Investment Advisers Act of 1940 and the Investment Company Act of 1940. Without admitting or denying the SEC’s findings, BlackRock agreed to a cease-and-desist order and a censure in addition to the monetary penalty.

Previously, the SEC charged and then resolved its action against William Sadleir, the founder of Aviron, for misappropriating BIT funds invested in Aviron.

The SEC’s investigation was conducted by Salvatore Massa and Brian Fitzpatrick under the supervision of Mr. Dean and Corey Schuster, all with the Enforcement Division’s Asset Management Unit.


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