SEC Charges BlackRock $2.5 Million for Investment Misreporting


Image of SEC logo and a gavel, BlackRock
BlackRock’s SEC fine raises questions about its suitability for managing a Bitcoin ETF. Image by Sergei Tokmakov, Pixabay.

According to a Tuesday release from the U.S. Securities and Exchange Commission (SEC), BlackRock Advisors LLC has agreed to a $2.5 million penalty for failing to accurately describe investments in the entertainment industry.

The development is of particular interest as it coincides with speculation around BlackRock’s spot Bitcoin ETF.

What Did BlackRock Get Wrong?

According to the SEC

, from 2015 to 2019, BlackRock’s Multi-Sector Income Trust made substantial investments in Aviron Group, a firm that specialized in developing advertising plans for films. Despite the firm’s role in the trust’s portfolio, BlackRock mischaracterized Aviron as a “Diversified Financial Services” entity in multiple annual and semi-annual reports. Additionally, BlackRock claimed higher interest rates paid by Aviron than were actually the case. The discrepancies were later identified and corrected by BlackRock in 2019.

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

Parallel Events: The Case of the Spot Bitcoin ETF

The SEC’s announcement against BlackRock occurred on the same day the firm’s spot Bitcoin ETF appeared on the Depository Trust & Clearing Corporation (DTCC) listing. Eric Balchunas, a senior Bloomberg ETF analyst, noted that the DTCC listing was “all part of the process” for bringing a Bitcoin ETF to market. The spot Bitcoin ETF vanished from the DTCC platform for several hours before reappearing, however, sowing confusion among market watchers.

A DTCC spokesperson clarified that the iShares Bitcoin ETF has been on the platform since August and stated the listing is not a signal of any impending regulatory approval.

The recent charge occurred amid heightened scrutiny from the SEC over firms dealing with cryptocurrency assets– and the SEC’s action against BlackRock could have larger implications for crypto regulation. This is particularly important since BlackRock, along with other financial institutions, is waiting for the SEC’s decision on their respective Bitcoin ETF applications. While BlackRock has corrected its reporting inaccuracies, the charge raises questions about how the SEC views the firm’s managerial competencies, especially as it waits for approval for its crypto investment products.


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