BlackRock pays $2.5 million fine to SEC for misleading investors
BlackRock Advisors has been fined $2.5 million by the U.S. Securities and Exchange Commission (SEC) for providing inaccurate descriptions of investments related to the entertainment sector within a publicly managed fund.
The SEC alleged that BlackRock inaccurately categorized Aviron as a company providing “Diversified Financial Services” in several of BIT’s annual and semi-annual reports, which were made available to its investors. Additionally, the SEC claimed that BlackRock misrepresented Aviron’s interest rate, stating it was higher than it actually was. However, BlackRock discovered these errors in 2019 and corrected the information about Aviron’s investment in subsequent years.
The SEC had previously charged Aviron founder William Sadleir of misappropriating BIT funds invested in his company, defrauding BlackRock Multi-Sector Income Trust of at least $13.8 million from the $75 million investment. These funds were allegedly misused for personal and business expenses. However, the SEC’s action against Sadleir has since been resolved.
Andrew Dean, co-chief of the enforcement division’s asset management unit at the SEC, said that investment advisers have a responsibility to provide accurate and essential information about the assets of the funds they manage. He stated, “BlackRock failed to do so with the Aviron investment.”
While this case is unrelated to the cryptocurrency, BlackRock, as the world’s largest asset manager, has attracted attention for its proposal to launch a spot Bitcoin exchange-traded fund (ETF).
The SEC’s charges against BlackRock for investment disclosure failures coincided with the notice of the listing of its spot Bitcoin ETF on the Depository Trust & Clearing Corporation (DTCC) listing. This development has led many to speculate that the approval for a spot Bitcoin ETF is imminent.
BlackRock’s bitcoin ETF application is highly anticipated, given its status as a $9 trillion asset manager with a strong track record of SEC approvals.
Despite the crypto winter, BlackRock has been increasing its exposure to digital assets space and blockchain technology. The asset manager made headlines in January after it added bitcoin as an eligible investment to its flagship Global Allocation Fund, which is one of the most preferred vehicles for ordinary and passive investors.
A company filing shows that the move enables BlackRock to allocate part of the fund’s $15 billion to cash-settled bitcoin futures traded on commodity exchanges registered with the CFTC. In December, the New York-based financial conglomerate announced the launch of its crypto ETF in Europe despite the regulatory concerns in the continent.
BlackRock also participated in a $400 million funding round for Boston-based fintech startup Circle. In addition to its investment and role as a primary asset manager of USDC cash reserves, BlackRock entered into a partnership with Circle to explore capital market applications for its stablecoin.