In the Matter of BlackRock Advisors, LLC
Securities and Exchange Commission
Investment Advisers Act Release No. 4065 (2015)
Daniel Rice III was a portfolio manager of energy-focused registered funds, private funds, and separate accounts for BlackRock Advisors, LLC (BlackRock), an investment adviser registered with the Securities and Exchange Commission (SEC). While employed by BlackRock, Rice formed and personally funded Rice Energy, LP, a family-run oil-and-gas-production company. Rice did so without BlackRock’s prior approval, which violated BlackRock’s private-investment policy for its employees. Notwithstanding this violation, BlackRock determined that Rice’s involvement with Rice Energy was not a conflict of interest and did not disclose the violation or Rice’s involvement with Rice Energy to the boards of directors of the funds Rice managed or the holders of the separate accounts he managed. Rice Energy later formed a joint venture with Alpha Natural Resources, Inc. (ANA), a publicly traded company in which several BlackRock funds and separate accounts managed by Rice were existing investors and that eventually became the largest holding of one of those funds. BlackRock’s legal and compliance department warned that the joint venture could create conflicts of interest, but BlackRock allowed Rice to continue his involvement with Rice Energy. Although BlackRock’s chief compliance officer, Bartholomew Battista, regularly approved outside business activities of BlackRock employees, he never recommended, and BlackRock never adopted, written policies and procedures to monitor those activities and ensure those activities were disclosed to fund boards and advisory clients. The SEC brought an administrative proceeding against BlackRock and Battista for violations of §§ 206(2) and 206(4) of the Investment Advisers Act of 1940 (Advisers Act), Rule 206(4)-7 under § 206(4), and Rule 38a-1 under the Investment Company Act of 1940 (Company Act).
Rule of Law
Holding and Reasoning ()
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