By Chelsey Dulaney
BlackRock Inc. agreed to pay a $12 million penalty to settle
claims that its adviser business failed to disclose a conflict of
interest tied to one of its energy-find portfolio managers, the
Securities and Exchange Commission said.
The agency said Daniel Rice III was managing energy-focused
funds and separately managed accounts at BlackRock when he founded
and became the principal investor in Rice Energy, an
oil-and-natural gas company, in 2005. Rice Energy later formed a
joint venture with a publicly-traded coal company Alpha Natural
Resources. The venture eventually became the largest holding in the
$1.7 billion BlackRock Energy & Resources Portfolio, which Mr.
Rice managed.
Legal experts have said for years that Mr. Rice's activities
might pose legal problems.
The SEC's order found BlackRock knew and approved of Mr. Rice's
investment and involvement with Rice Energy as well as the joint
venture, but failed to disclose this conflict of interest to either
the boards of the BlackRock registered funds or its advisory
clients.
A BlackRock spokesman said in a statement that "this has been a
learning experience for our firm," and BlackRock has taken steps to
enhance its policies and procedures related to employees' outside
business activities. "As a fiduciary for our clients, we take even
the appearance of conflicts of interest extremely seriously," the
spokesman said.
BlackRock said in its annual report earlier this year that it
had reached an agreement with SEC staff on a settlement, but at the
time, it hadn't yet been approved by the commission.
As part of the settlement, BlackRock must bring on an
independent compliance consultant to do an internal review.
New York-based BlackRock is the world's largest asset manager
with about $4.8 trillion in assets under management.
Write to Chelsey Dulaney at Chelsey.Dulaney@wsj.com
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