SEC Fined $2.5 Million To BlackRock For Providing Misleading Investment Reports

The Securities and Exchange Commission (SEC) has imposed penalties on BlackRock Advisors, LLC. They serve as the registered investment adviser to the BlackRock Multi-Sector Income Trust (BIT). The penalties were issued due to inaccurate investment descriptions in periodic reports filed between 2015 and 2019.

During the Relevant Period, a misclassification occurred at BlackRock regarding Aviron Group LLC. The erroneous labeling categorized it as a “Diversified Financial Services” firm. However, in reality, Aviron’s primary business focused on developing print and advertising plans for one to two films per year.

Additionally, they funded distribution expenses in exchange for an agreed-upon rate of return. This misclassification persisted in eight publicly available reports filed with the SEC. Moreover, six reports contained inaccuracies regarding the coupon rate that Aviron was supposed to pay BIT. Consequently, these errors led to overestimations of potential income from the investment.

Amongst the reports, some indicated a higher nominal yield while one reported a lower yield. Additionally, another report presented conflicting information altogether. The presence of such discrepancies ultimately resulted in misleading information being disseminated to investors.

Corrective Actions

BlackRock identified several inaccuracies in 2019. They took proactive measures to address the issues. They amended their disclosures to reflect the Aviron Investment accurately. Additionally, BlackRock provided BIT with a rate of return that aligned with other investments in the portfolio.

BlackRock has agreed to pay the SEC a civil money penalty of $2.5 million as a result of the violations. This penalty will be transferred to the general fund of the United States Treasury under applicable legal provisions. According to Andrew Dean, Co-Chief of the Enforcement Division’s Asset Management Unit.

“Investment advisors have a responsibility to provide this vital information, and BlackRock failed to do so with the Aviron investment.”

The SEC’s action regarding BlackRock Advisors, LLC highlights the crucial importance of accurate financial reporting. Investors heavily depend on this information to make informed decisions. The $2.5 million penalty imposed on BlackRock serves as a reminder of the severe repercussions that accompany negligence in fulfilling this responsibility.

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