Asset Manager Accused of Operating ETF Without Necessary Exemption
The US Securities and Exchange Commission said that BlackRock Fund Advisors (BLK) will pay $1.5M to resolve charges accusing the asset manager of advising an exchange-traded fund to violate the Investment Company Act. BlackRock ran the Russia Fund ETF with out the necessary exemptive order from 12/2010 to 1/2015. The exemptive order is necessary because there are some ETF traits that would cause the fund and dealers to violate the Act were it not for having an order.
According to the Commission, BlackRock was notified in 2011 that the exemptive relief that had been issued to other investment companies that it advised could not be applied to funds that were organized separately. Despite knowing this, BlackRock is said to have kept running the ETF without the necessary exemption. It wasn’t until 2015 when, after more talks with the SEC, that the asset manager merged the Russia Fund ETF with another investment company that it advised. It could then apply another acquired exemptive relief to the Russia Fund ETF.