Skip to Content

SEC warns BlackRock of possible enforcement action

BlackRock CEO Larry FinkBlackRock CEO Larry Fink
BlackRock CEO Larry Fink

BlackRock, the world’s largest asset manager, revealed in a regulatory filing Friday that it recently received a Wells notice from the U.S. Securities and Exchange Commission warning it of a possible lawsuit.

BlackRock says the Wells notice, which is the SEC’s version of a “heads up” when it is considering a possible civil action against a person or a company, pertains to the case of Daniel J. Rice III, a former portfolio manager at the BlackRock Energy & Resources Portfolio. BlackRock says Rice was removed from his post as a portfolio manager with that particular fund in 2012, and soon after, retired from the company “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 LP and related entities.”

Rice’s departure from BlackRock in 2012 came about after The Wall Street Journal reported on his role as founder of Rice Energy, an oil and gas exploration company with substantial acreage in the Marcellus and Utica shale formations, and how that position could conflict with his role managing billions of dollars in energy investments at BlackRock.

BlackRock said in its filing Friday that there was “no improper trading within the portfolios managed by Mr. Rice and that no clients were harmed.” The company received the Wells letter on June 17.

“The SEC staff has taken the preliminary view that BlackRock Advisors’ disclosure as it related to Mr. Rice’s situation, and its policies and procedures, were inadequate,” BlackRock said in the filing. It added that it plans to cooperate with the SEC investigation and that it will also respond to the SEC’s letter by arguing that no action should be brought against the company.