The U.S. Securities and Exchange Commission (SEC) settled with BlackRock today. BlackRock is under the allegations of inaccurately describing investments in the entertainment industry. The financial giant has agreed to pay a $2.5 million fine as part of the resolution.
These charges come at a time when the financial world eagerly anticipates the outcome of the SEC’s evaluation of BlackRock’s application for a Bitcoin exchange-traded fund (ETF). If approved, this ETF would be the first of its kind in the United States.
BlackRock agreed to the settlement without admitting or denying the SEC’s allegations, following the customary practice in such cases.
The SEC claims that from 2015 to 2019, BlackRock’s Multi-Sector Income Trust (BIT) made investments in Aviron Group, LLC. BlackRock categorized Aviron, a film company, as a “Diversified Financial Services” company, an assertion the SEC found inaccurate.
“Retail and institutional investors rely on accurate disclosures of the companies that make up a closed-end or mutual fund’s portfolio to evaluate a current or prospective investment in the fund,” explained Andrew Dean, Co-Chief of the Enforcement Division’s Asset Management Unit. “Investment advisers are responsible for providing this vital information, and BlackRock failed to do so with the Aviron investment.”
The SEC also alleged that BlackRock falsely claimed that Aviron paid a higher interest rate than the actual rate. In 2019, BlackRock identified these inaccuracies and began reporting the Aviron investment accurately in subsequent reports.
This incident is not the first time the SEC has taken action against BlackRock. In 2015, the agency imposed a $12 million penalty on BlackRock Advisors for failing to disclose a conflict of interest. In 2017, the firm was fined $340,000 for improperly using separation agreements that required departing employees to waive their ability to obtain whistleblower awards.
More to Bitcoin ETF Application
The cryptocurrency industry has been closely monitoring BlackRock since the asset manager unexpectedly filed for a physical Bitcoin ETF in June. Such an ETF would provide institutional investors on Wall Street with exposure to the world’s largest cryptocurrency, enabling them to purchase shares linked to its price.
The SEC has consistently denied all Bitcoin ETF applications presented for review over the past decade, citing concerns about market manipulation in the cryptocurrency space as the primary reason. However, market analysts believe that BlackRock could change the situation, given its significant presence in financial markets and its nearly unblemished record when applying for ETFs.
Rumors have emerged this week suggesting that the SEC may soon approve a Bitcoin ETF. BlackRock appears to be gearing up for a potential launch. Market observers believe that a Bitcoin exchange-traded fund could inject a substantial amount of capital into the cryptocurrency market, with blockchain data firm CryptoQuant estimating that it could boost the market by as much as $1 trillion. These developments have coincided with a notable surge in the price of Bitcoin, driven by expectations of regulatory approval.
