The Securities and Exchange Commission is recommending that action be taken against BlackRock subsidiary BlackRock Advisors, an 8-K filing from BlackRock on Friday said.
The Wells notice is in response to a possible conflict of interest with former BlackRock employee Daniel J. Rice III co-managing $4.4 billion in energy assets at the firm and his family's private energy investments.
In June 2012, BlackRock announced that Mr. Rice “would no longer serve as a portfolio manager for the BlackRock Energy & Resources Portfolio in order to address any perception of a potential conflict of interest as a result of his personal investments and involvement in a family business, Rice Energy,” according to the filing. Mr. Rice retired from BlackRock in December 2012 as managing director.
Although BlackRock concluded there was no improper trading within the portfolios managed by Mr. Rice and that no clients were harmed, the SEC staff has taken the preliminary view that BlackRock's disclosure of Mr. Rice's situation, and its policies and procedures, were inadequate.
BlackRock plans to continue to cooperate with the SEC's inquiry and intends to make a submission to the SEC staff setting forth why no action should be taken against the firm. BlackRock does not expect any resolution of the matter to have a material adverse effect on its financial results or operations, the filing said.
BlackRock spokesman Brian Beades issued the following statement in an e-mail: “BlackRock has further enhanced its compliance policies and procedures as our business and industry evolve and in keeping with best practice. While BlackRock does not agree with the SEC staff's preliminary view, we will continue to cooperate fully with its inquiry.”