Staff at the US Securities and Exchange Commission (SEC) have recommended disciplinary action against BlackRock Advisors over possible failures to disclose conflicts of interest.
In an 8-K filing with the SEC, BlackRock revealed it received a “Wells Notice” from the regulator on June 17. It said that SEC staff have “taken the preliminary view” the firm’s disclosures of former Portfolio Manager Daniel Rice III’s investments in his family business, Rice Energy, “were inadequate.”
The Wells Notice is a standard SEC procedure for informing parties under investigation of recommended action against them, according to the regulator’s enforcement handbook.
Rice co-managed $4.4 billion in energy assets for BlackRock until June 2012, when the firm announced he would leave “in order to address any perception of a potential conflict of interest as a result of his personal investments and involvement” in Rice Energy and its affiliates.
According to the 8-K filing, BlackRock concluded that “there was no improper trading within the portfolios managed by Mr. Rice and that no clients were harmed.”
However, staff at the SEC noted possible violations of rules stipulating that firms have and follow written policies to comply with securities law.
“BlackRock Advisors does not believe these provisions were violated,” the firm stated in its filing.
Rice retired in December 2012, having run portfolios for the firm and a predecessor since 1984. Less than a year after leaving BlackRock, Rice joined the board of directors of the family shale gas operation. It completed its $1 billion initial public offering this January.
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