In a recent development, BlackRock Advisors, LLC, an investment adviser, has agreed to settle charges brought against it by the Securities and Exchange Commission (SEC) for not properly disclosing investments in the entertainment industry that constituted a significant portion of a publicly traded fund it advised. As part of the settlement, BlackRock will pay a penalty of $2.5 million.

The SEC's order highlights that between 2015 and 2019, BlackRock Multi-Sector Income Trust (BIT) made substantial investments in Aviron Group, LLC through a lending facility. Aviron is a company that focuses on developing print and advertising plans for one to two films annually. However, the SEC found that in multiple annual and semi-annual reports made available to investors and filed with the SEC, BlackRock inaccurately categorized Aviron as a "Diversified Financial Services" company. Furthermore, BlackRock overstated the interest rate paid by Aviron. BlackRock rectified these misrepresentations in 2019, ensuring accurate reporting of Aviron's investments in subsequent reports.

Andrew Dean, Co-Chief of the Enforcement Division's Asset Management Unit, emphasized the importance of accurate disclosures for investors in evaluating closed-end or mutual funds. Dean stated, "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. Investment advisers have a responsibility to provide this vital information, and BlackRock failed to do so with the Aviron investment."

BlackRock has consented to the SEC's findings, acknowledging that it violated the Investment Advisers Act of 1940 and the Investment Company Act of 1940. While not admitting or denying the SEC's allegations, BlackRock has agreed to a cease-and-desist order, a censure, and the $2.5 million penalty.

It is worth noting that the SEC had previously charged William Sadleir, the founder of Aviron, for misappropriating funds invested by BIT in Aviron. That case has already been resolved.

The investigation by the SEC was conducted by Salvatore Massa and Brian Fitzpatrick, under the supervision of Andrew Dean and Corey Schuster, with the Enforcement Division's Asset Management Unit.

The settlement between BlackRock Advisors and the SEC serves as a reminder to investment advisers about the crucial responsibility of providing accurate and transparent information to investors.