BlackRock Settles with SEC for $2.5 Million Over Inaccurate Fund Investment Descriptions

BlackRock Advisors has agreed to pay $2.5 million as part of a settlement with the Securities and Exchange Commission (SEC) to resolve allegations that the firm inaccurately described investments made by a fund it advised in a now-defunct film production company.

The BlackRock Multi-Sector Income Trust (BIT) had made significant investments in Aviron Group, which, according to the SEC, was inaccurately described by BlackRock in reports to the regulatory body as a "diversified financial services" firm. In reality, Aviron's sole line of business was developing plans for distributing films and funding associated distribution costs.

BlackRock conducted an internal review after discovering fraud committed by Aviron and its principal against BIT. The founder of Aviron was sentenced to more than three years in prison in October 2022 for misusing Covid-19 relief loans and was separately charged by the SEC for misappropriating BIT funds.

The SEC's investigation found that BlackRock sourced the inaccurate description of Aviron from a third-party vendor and failed to correct it across eight reports from October 2015 to October 2019. The firm also misrepresented Aviron's interest rate.

BlackRock changed its disclosures to correctly identify Aviron as being in the "entertainment" sector after identifying its reporting errors in 2019.

BlackRock cooperated with the SEC's investigation by providing witnesses, documents, and analysis on a voluntary basis, covering losses associated with Aviron, and offering BIT a rate of return equal to the other investments in its portfolio.

A spokesperson for BlackRock stated, "We are pleased to fully resolve the SEC's investigation of this matter. As soon as BlackRock discovered the reporting errors, we acted promptly to correct them and enhance our procedures to prevent a reoccurrence."

In reaching the settlement, BlackRock neither admitted nor denied the SEC's findings.

By fLEXI tEAM