BlackRock to Pay $2.5M SEC Fine for Charges of Inaccurate Disclosure

The SEC charged the asset manager with describing a marketing firm as a financial services firm.

The Securities and Exchange Commission imposed a $2.5 million penalty on BlackRock Advisors LLC Tuesday for misstating one of the assets in BlackRock Advisors’ Multi-Sector Income Trust (BIT), a fund advised by BlackRock Inc. from 2015 to 2019.

Regular disclosures by BlackRock Advisors made to the SEC stated that Aviron, a company which BIT had lent nearly $75 million, was a “well diversified financial services firm.” Aviron, now defunct, actually provided distribution and marketing services for films, according to the SEC’s charges. In October 2017, the BIT fund held 9.78% of its total value in debt instruments related to Aviron, the largest asset in the portfolio and the only asset in the motion picture industry.

BlackRock Advisors discovered the discrepancy in 2019 and corrected it, reporting it accurately thereafter, according to the SEC. In the order, BlackRock Advisors acknowledged a violation of the Investment Advisers Act of 1940 but did not acknowledge the specific findings described by the regulator.

The BIT fund’s primary investment objective “is to seek high current income, with a secondary objective of capital appreciation,” and it keeps at least 80% of its portfolio in debt instruments. According to its website, it currently has $519.3 million in net assets and $804.5 million in total managed assets.

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Aviron was founded and owned by William Sadleir. In November 2022, Sadleir was charged by the SEC with defrauding BlackRock of $13.8 million by using the loans provided to Aviron for personal expenses. The SEC permanently enjoined him from selling securities, except on his own account.

The SEC ordered Sadleir to pay $17.8 million in restitution, and he was sentenced to a 72-month term in prison by the U.S. District Court for the Central District of California in October 2022.

BlackRock did not respond to request for comment on the charges.

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