BlackRock (BLK) Risk Factors

BlackRock's trust bank subsidiary, which is a national banking association chartered by the OCC, is subject to OCC regulation and capital requirements that may limit its business activities. The OCC has broad supervisory and enforcement authority over BlackRock's trust bank. Having a subsidiary subject to banking regulation may put BlackRock at a competitive disadvantage because certain of its competitors are not subject to the limitations imposed by such regulation.

BlackRock faces increasing focus from regulators, officials, clients and other stakeholders regarding ESG matters. BlackRock offers choice to its clients who have a variety of goals and preferences, including those who want to increase their exposure to the low-carbon transition and those who choose not to invest in products or strategies with sustainable investment objectives. BlackRock is subject to competing demands from different stakeholder groups with divergent views on ESG-related matters, including in countries in which BlackRock operates and invests, as well as in states and localities where BlackRock serves public sector clients. This divergence has and continues to increase the risk that any perceived or actual action or lack thereof by BlackRock on such matters on behalf of its clients will be viewed differently by various stakeholders and adversely impact BlackRock's reputation and business, including through withdrawals, redemptions, terminations or decisions not to commit or invest new capital by clients, as well as legal and governmental action and scrutiny. Some US states and state officials have adopted or proposed legislation or otherwise have taken official positions restricting or prohibiting state government entities from doing certain business with entities identified by the state as "boycotting" or "discriminating" against particular industries or considering ESG factors in their investment processes and proxy voting. Other states and localities may adopt similar legislation or other ESG-related laws and positions that adversely impact BlackRock's business. BlackRock may also communicate certain initiatives and goals for its corporate activities related to environmental, diversity, and other ESG-related matters. BlackRock could be criticized for the scope or nature of any initiatives or goals, or for revisions thereto. Such initiatives or goals may be difficult or costly to implement, may not advance at the anticipated pace, or be accomplished within the announced timeframe or at all. If BlackRock is not able to successfully manage ESG-related expectations across varied stakeholder interests, it may adversely affect BlackRock's reputation, ability to attract and retain clients, employees, shareholders and business partners or result in litigation, legal or governmental action, which may cause its AUM, revenue and earnings to decline.

BlackRock's business and operating activities are subject to increasing regulatory oversight outside of the US and the Company may be affected by several proposed or implemented reform initiatives in the EMEA and the Asia-Pacific regions, as well as volatility associated with international regulatory uncertainty. While BlackRock is, and may become, subject to numerous reform initiatives internationally, see Item 1, Business – Regulation, key reforms in these regions include: European Union - Enhanced Regulatory Scrutiny of Technology Service Providers to Financial Services Firms: The EU's Digital Operational Resilience Act ("DORA"), which focuses on direct regulation of providers and users of technology and data services, will become applicable beginning in January 2025. DORA will, among other things: (1) introduce additional governance, risk management, incident reporting, resilience testing and information sharing requirements to several of BlackRock's European entities and certain Aladdin clients; and (2) potentially subject Aladdin to additional oversight. In parallel with DORA, the UK proposed a new Critical Third Party regime to regulate certain third parties designated by HMT as "critical" to the financial sector, and UK regulators have issued a consultation on proposed requirements for "critical" third parties, with further consultations expected in 2024. - Retail Investment Strategy: In 2023, the European Commission ("EC") adopted a Retail Investment Strategy package with wide-reaching amendments intended to enhance protections for retail investors. If enacted as proposed, these changes may impact BlackRock's operations in European markets, including product development, client servicing and distribution models. United Kingdom - FSMA 2023: The Financial Services and Markets Act 2023 ("FSMA") reflects significant changes to the UK framework for financial services regulation, including changes that: (1) revoke retained EU law related to financial services regulation, (2) amend the UK Markets in Financial Instruments Directive and Markets in Financial Instruments Regulation frameworks, (3) establish a new designated activities regime and (4) reform the financial promotion regime for unauthorized firms. The UK government and FCA are expected to publish further legislation setting out specific changes impacting the UK market in 2024. - Mansion House Reforms: The Mansion House reforms announced in July 2023 also build on the new UK regulatory framework enabled by the FSMA. Potential impacts to the asset management sector include: (1) repeal and replacement of the packaged retail and insurance based investment products ("PRIIPs") Regulation; (2) review of the UK's green finance strategy, including potential regulation of ESG data providers; (3) review of governance through the Senior Managers and Certification Regime; (4) repeal of EU legislation on the European Long-Term Investment Fund; (5) market infrastructure reforms; (6) reassessment of the boundary between investment advice and financial guidance; and (7) independent review of the UK investment research landscape. - Overseas Fund Regime ("OFR"): OFR, the simplified regime through which non-UK funds can register with the FCA to be marketed to UK retail investors, was enacted in February 2022 and is expected to be implemented through 2024. OFR requires consumer protection regimes in EU countries where BlackRock funds are domiciled to be found equivalent to the UK's regime in order to market such funds in the UK. - Conduct Regulation: The FCA continues to focus on conduct regulation, including the implementation of the Consumer Duty by all asset management firms, including BlackRock's UK subsidiaries. The Consumer Duty rules require firms to act to deliver good outcomes for retail customers in their manufacture and distribution of products and services, in respect of price and value, consumer understanding and consumer support. Any failure to meet the FCA's regulatory expectations could expose BlackRock to regulatory sanctions and increased reputational risk. - UK Stewardship Code Review: The UK Financial Reporting Council has announced a planned review of the UK Stewardship Code in 2024 to consider potential revisions to address stakeholder concerns. Asia-Pacific - Regulatory Environment in China: The Company's operations in China are subject to a number of regulatory risks, including an evolving regulatory environment and complex data security and data transfer regulations. These factors may increase compliance risk and costs, limit the Company's ability to source and execute new investment opportunities and lead to impairment losses on its investments. Restrictions on transfers of certain types of onshore data of the Company's Chinese entities to offshore entities also may limit BlackRock's ability to aggregate, report and monitor such data on its global platform. In addition, a number of regulators in China have jurisdiction over BlackRock's business operations, increasing operational and regulatory engagement complexity. These risks may be further heightened by additional scrutiny by Chinese regulators of certain sectors, such as technology and other industries that might be deemed to be of national importance. International regulatory reforms could require BlackRock to alter its future business or operating activities, which could be time-consuming and costly, increase regulatory compliance costs, result in litigation, impede the Company's growth and cause its AUM, revenue and earnings to decline. Regulatory reform may also impact BlackRock's clients, which could cause them to change their investment strategies or allocations in manners that may be adverse to BlackRock.

In recent years, a number of regulatory reforms have been proposed or fully or partially implemented in the US, and the level of regulatory scrutiny to which BlackRock is subject has increased. These risks have been heightened as the pace of regulatory rulemaking has intensified. BlackRock, as well as its clients, vendors and distributors, have expended resources and altered certain of their business or operating activities to prepare for, address and meet the requirements that such regulatory reforms impose. While BlackRock is, and may become, subject to numerous reform initiatives in the US, see Item 1, Business – Regulation, key regulatory reforms that may impact the Company include: - Antitrust Rules and Guidance: In 2023, the Federal Trade Commission ("FTC") and the Antitrust Division of the Department of Justice (the "DOJ") issued a notice of proposed rulemaking with amendments to rules enacted under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 ("HSR") that require parties in certain transactions to provide the FTC and DOJ prior notice and observe a waiting period before consummation of such transactions. The proposals would significantly expand the information required to be reported and documentation to be submitted in connection with an HSR filing. If enacted as drafted, the proposed rules could substantially increase BlackRock's pre-merger notification expenses and delay transactions. In December 2023, the FTC and DOJ also jointly issued new merger guidelines, which could impact the ability of the Company to expand its services through strategic investments or acquisitions. - Designation as a Systemically Important Financial Institution ("SIFI"): The FSOC has the authority to designate nonbank financial institutions as SIFIs in the US under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. In November 2023, the FSOC finalized amendments to its existing interpretive guidance to remove the prioritization of an activities-based approach over an entity-specific approach to designation in connection with addressing potential risks to financial stability, although the amendment clarified that the FSOC retained the ability to use an activities-based approach when appropriate. If BlackRock is designated as a SIFI, it could become subject to enhanced regulatory and capital requirements and direct supervision by the Federal Reserve. - US DOL Fiduciary Rule: In October 2023, the US DOL proposed a new regulation redefining the meaning of "investment advice fiduciary" under ERISA as well as amendments to several prohibited transaction exemptions applicable to investment advice fiduciaries. If adopted as proposed, the rule would substantially expand when a person would be considered a fiduciary subject to ERISA and could require BlackRock to revise a number of its distribution relationships, create compliance and operational challenges for BlackRock and its distribution partners, and limit BlackRock's ability to provide certain services to applicable clients. - SEC Rules Governing Security-Based Swaps: In 2021, the SEC proposed rules in connection with security-based swaps ("SBS") transactions to require public reporting of large SBS positions. These rules, if adopted as proposed, may affect the types of transactions BlackRock may choose to execute in SBS or other SBS-related assets, introduce or increase costs relating to such transactions, and impact the liquidity in the SBS markets in which BlackRock transacts. - SEC Rules on Private Fund Advisers: In 2023, the SEC adopted new rules and amendments to enhance regulation of private fund advisors. These included amendments to Form PF for registered investment advisers requiring new disclosures, filing obligations and enhanced reporting. The SEC adopted additional rules requiring registered private fund advisers to, among other things, provide quarterly reports to fund investors, obtain annual audits for funds, distribute fairness opinions in connection with certain transactions, prohibit certain types of preferential terms and treatment, and provide transparency to investors of all types of preferential treatment granted to other investors in the same fund. Implementing these rules and amendments may significantly increase BlackRock's reporting, disclosure and compliance obligations and create operational complexity for BlackRock's alternatives products. - Proposed Rules on Regulation ATS: In 2023, the SEC re-proposed amendments to Regulation ATS. The proposed rules would expand the types of systems that could fall within the definition of "exchange" and extend Regulation ATS and Regulation Systems Compliance and Integrity to systems involving US government securities trading. If enacted as proposed, these rules may increase compliance costs for BlackRock. - SEC US Treasury Clearing Mandate: In December 2023, the SEC adopted rules mandating central clearing of US Treasury repurchases and certain other Treasury transactions. The rules require many market participants, including a large number of BlackRock funds and accounts, to clear Treasury repurchase transactions and potentially certain cash Treasury securities transactions through a clearing agency registered with the SEC, which could increase transaction costs for BlackRock's clients. - Proposed Rules on Equity Market Structure: In 2023, the SEC proposed equity market structure reforms that would significantly change how national market system ("NMS") stock orders are priced, executed and reported. The reforms include: (1) a requirement for certain retail orders to be subject to order-by-order competition, (2) an SEC-level best execution rule and (3) an adjustment to the tick sizes at which NMS stocks can be quoted or traded. If enacted as proposed, the collective impact of the rules may adversely affect market efficiency and execution costs, which would result in negative effects for BlackRock's business and clients. - SEC Rules on Short Sales and Reporting of Securities Loans: In 2023, the SEC adopted a new rule requiring certain institutional managers to report short positions and activity to the SEC for publication on an aggregate basis, which could potentially impact investment strategies and result in greater operational burdens and cost for BlackRock. The SEC also adopted a new rule requiring certain persons to report information on securities loan transactions to a registered national securities association which will then publish certain information. The rule may increase BlackRock's operational burdens and costs. - SEC Standard Settlement Rules: In 2023, the SEC adopted amendments and new rules which, among other things, shortened the standard settlement for most securities transactions to one business day after the trade date (T+1), which will likely increase BlackRock's operational burdens and costs. - SEC Predictive Data Analytics Rules: The SEC proposed new rules in 2023 that would require broker-dealers and investment advisers, when engaging or communicating with investors using predictive data analytics ("PDA") and PDA-like technologies, to evaluate such technologies for conflicts of interest and, where identified, eliminate or neutralize the conflict of interest. If adopted as proposed, the rules could encompass a wide range of forward-looking uses of technology applications and impose significant operational burdens and costs. - SEC Rulemakings for US Registered Funds and Investment Advisers: The SEC has recently engaged in various initiatives and reviews impacting regulatory structure governing the asset management industry and registered investment companies. For example, the SEC adopted rules requiring certain funds to provide tailored fund shareholder reports, adopted final amendments to the rule governing fund names, expanding the scope of the rule to fund names including growth, value, ESG or similar terms, and proposed rules governing outsourcing of certain functions by investment advisers to service providers. Regulatory reforms in the US could require BlackRock to alter its future business or operating activities, which could be time-consuming and costly, increase regulatory compliance costs, result in litigation, impede the Company's growth and cause its AUM, revenue and earnings to decline. Regulatory reform may also impact BlackRock's clients, which could cause them to change their investment strategies or allocations in manners that may be adverse to BlackRock.

Policymaking workstreams focused on the financial services sector led by global standard setters, such as the Financial Stability Board ("FSB") and International Organization of Securities Commissions ("IOSCO"), may lead to or inform new regulations in multiple jurisdictions in which BlackRock operates. Such workstreams have focused on areas such as money market funds ("MMFs"), open-ended funds ("OEFs") and sustainability regulations. BlackRock is, and may become, subject to increasing regulation in these areas, see Item 1, Business – Regulation, including: - Macroprudential Policies for Asset Managers: Concerns about liquidity and leverage risks in the asset management industry and wider market-based finance sector have been heightened since the COVID-19 pandemic and reinforced by the Liquidity Driven Investment events in the UK. This has prompted a broad review of existing regulations globally, including an assessment of the adequacy of certain structural market components in mitigating risks by the FSB, IOSCO, the US Securities and Exchange Commission (the "SEC") and the Financial Stability Oversight Council ("FSOC"). In November 2022, the SEC proposed amendments to rules governing OEF liquidity risk management and swing pricing. The EU also proposed reforms to increase the availability of liquidity management tools to OEFs (including MMFs), enhance reporting on the use of liquidity management tools by OEFs to national regulators and allow such regulators to require OEF managers to activate liquidity management tools in extreme market conditions. Meanwhile, the UK proposed introducing liquidity facilities to certain asset owners, which could result in regulatory burdens on asset managers. If any of these regulatory or policy actions result in broad application of macroprudential tools to OEFs or require changes to structural features of certain OEFs, it could limit BlackRock's ability to offer products to certain clients and/or result in clients altering their investment strategies or allocations in a manner that is adverse to BlackRock. - Global MMF Reforms: Following the market events of March 2020, US, UK and EU authorities initiated a review of existing regulatory frameworks with the aim of improving the resilience of MMFs in market downturns. In the US, the SEC adopted changes to Rule 2a-7, the primary rule under the Investment Company Act of 1940 governing MMFs, including changes to required liquidity levels and certain operational aspects of such funds, and requiring mandatory liquidity fees under certain circumstances. The UK released a consultation in December 2023 indicating their intent to change regulatory requirements for MMFs domiciled or marketed in the UK, including material increases in required liquidity levels. Although EU authorities stated in July 2023 that they would not re-open the EU regulatory framework for MMFs in the near term, the UK's proposed changes may increase pressure to implement similar reforms as the vast majority of MMFs sold in the UK are EU-domiciled and regulated. Such regulatory reforms could significantly and adversely impact certain of BlackRock's MMF products. - ESG and Sustainability: ESG and sustainability have been the subject of increased regulatory focus across jurisdictions. The International Sustainability Standards Board ("ISSB") released its first two disclosure standards in 2023, which may inform national regulators' approaches. For example, the UK, Singapore, Hong Kong, Taiwan and Australia have already indicated their intention to endorse these standards. In the US, the SEC has proposed a series of rules that would require, among other things: (1) corporate issuers to make substantial climate-related disclosures in periodic reports, including with respect to governance, risk management, business strategy, financial statement metrics and greenhouse gas ("GHG") emissions and (2) enhanced ESG disclosures by investment companies and investment advisers in fund and adviser filings, including disclosures on ESG strategies and how ESG factors are considered, and GHG emissions disclosure by certain environmentally focused funds. Furthermore, the SEC has announced plans to propose rules to require enhanced disclosure regarding human capital management and board diversity for public issuers. It has also increased scrutiny of disclosure and compliance issues relating to investment advisers' and funds' ESG strategies, policies and procedures. In addition, the US Department of Labor ("DOL") issued final rules clarifying that Employee Retirement Income Security Act of 1974, as amended ("ERISA") plan fiduciaries can, but are not required to, consider the economic effects of ESG factors for purposes of investing ERISA plan assets and exercising voting rights with respect to plan investments. Moreover, California passed several laws in 2023 that will require companies doing business in California to make certain types of climate-related disclosures, and other states may adopt similar laws. The EU has enacted numerous regulations on ESG and sustainability, including on sustainability-related disclosures by financial market participants; integration of sustainability considerations into investment and risk management processes of asset managers and other institutional investors; making the advice and financial product distribution process more receptive to end-investor sustainability preferences; and requiring asset managers to report against an EU-wide taxonomy of environmentally sustainable activities and make detailed disclosures relating to ESG characteristics of funds and portfolios. Further regulations include the Corporate Sustainability Reporting Directive, which will require enhanced sustainability reporting for EU-based corporate issuers, with phased implementation beginning in 2024 and for a wider group of global companies from 2028. In December 2023, the EU reached provisional agreement on a directive, which if adopted in its current form, would require a wide group of European and global companies to provide transition plans and conduct due diligence on the sustainability of their suppliers. The EU and the UK Financial Conduct Authority ("FCA") are also developing rules and guidelines for the use of ESG or sustainability related terms in fund names, focused on specifying a minimum threshold of assets meeting ESG or sustainable criteria for such funds. Within the UK, the FCA has proposed UK-specific sustainability regulations, including a sustainable product classification system for funds and enhanced disclosure requirements, which are expected to apply on a staggered basis from July 2024. In addition, HMT released a consultation to bring ESG rating providers under regulation by the FCA and will consult on a UK-specific taxonomy of environmentally sustainable activities. A number of Asia-Pacific jurisdictions are consulting on sustainability reporting obligations aligned with the ISSB standards. Similarly, policymakers in Japan have announced that they are preparing a local version of the ISSB standards. Japan and Singapore have published codes of conduct for ESG data and ratings providers, with Hong Kong considering a similar approach, while India introduced a regulatory framework for ESG ratings providers in July 2023. As jurisdictions continue to develop legal frameworks on ESG and sustainability regulations, BlackRock faces increased fragmentation risk related to local implementation, resulting in complex and potentially conflicting compliance obligations and legal and regulatory uncertainty. Global regulatory reforms could require BlackRock to alter its future business or operating activities, which could be time-consuming and increase costs, including costs related to regulatory compliance, result in litigation, impede the Company's growth and cause its AUM, revenue and earnings to decline. Regulatory reform may also impact BlackRock's clients, which could cause them to change their investment strategies or allocations in manners that may be adverse to BlackRock.

BlackRock's business is subject to extensive regulation around the world. These regulations subject BlackRock's business activities to an array of increasingly detailed operational requirements, compliance with which is costly and complex. In addition, many of BlackRock's legal entities are subject to laws and regulations aimed at preventing corruption, money laundering, inappropriate employment practices, illegal payments and engaging in business activities with certain individuals, countries or groups, including but not limited to the US Foreign Corrupt Practices Act, the USA PATRIOT Act, the Bank Secrecy Act, the EU Anti-Money Laundering Directives, the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017, the UK Bribery Act, sanctions imposed by the US Treasury's Office of Foreign Assets Control, the United Nations and the EU and its member states, as well as those imposed by other countries in which BlackRock operates, such as His Majesty's Treasury's ("HMT") Office of Financial Sanctions Implementation. BlackRock is also subject to certain risk retention rules and regulation, as well as regulatory capital requirements, which require the Company to maintain capital to support certain of its businesses. Furthermore, many jurisdictions in which BlackRock operates have laws and regulations relating to data privacy, cybersecurity and protection of personal information, including the GDPR and UK GDPR, which impose stringent data protection rules for individuals within the European Economic Area ("EEA") and UK, respectively, and for personal data exported outside the EEA and UK. BlackRock is additionally subject to scrutiny from various government agencies that focus on antitrust and competition laws and regulations within the US and internationally, including in connection with merger control proceedings and proposed investments. Any determination of a failure to comply with any such laws or regulations could result in fines and/or sanctions against the Company, as well as reputational harm. Moreover, to the extent that these laws and regulations become more stringent, or if BlackRock is required to hold increased levels of capital to support its businesses, the Company's financial performance or plans for growth may be adversely impacted. BlackRock may also be adversely affected by a failure to comply with existing laws and regulations or by changes in the interpretation or enforcement of such laws and regulations, including those discussed above. Challenges associated with interpreting regulations issued in numerous countries in a globally consistent manner may add to such risks if regulators in different jurisdictions have inconsistent views or provide only limited regulatory guidance. In particular, violation of applicable laws or regulations could result in fines and/or sanctions, temporary or permanent prohibition of certain activities, reputational harm and related client terminations, suspensions of employees or revocation of their licenses, suspension or termination of investment adviser, broker-dealer or other registrations, or suspension or termination of BTC's bank charter or other sanctions, which could have a material adverse effect on BlackRock's reputation or business and may cause the Company's AUM, revenue and earnings to decline. For a more extensive discussion of the laws, regulations and regulators to which BlackRock is subject and regulated by, see Item 1, Business – Regulation.