76 Journal of Regulatory Compliance Issue II
the SEC did not follow its own guidance they laid out the prior year in the
G. Bartholomew Battista
In 2015, a disciplinary action was filed by the SEC against BlackRock
Advisors, LLC (“BlackRock”) and Bartholomew Battista (“Battista”) for
violating Sections 203(e) and 203(k) of the Investment Advisers Act of 1940
and Sections 9(b) and 9(f) of the Investment Company Act of 1940.254
Battista joined BlackRock in 1998 as the CCO.255 In this case, BlackRock
failed to disclose the conflict of interest for a portfolio manager’s personal
outside business.256 BlackRock needed written policies and procedures to
detect and monitor potential conflicts of interest with employees’ outside
endeavors.257 Battista, as the CCO, failed to disclose the conflict of interest
to the funds’ board of directors.258 The portfolio manager violated
BlackRock’s private investment policy, which Battista should have known
was not being reported to the board of directors.259
The portfolio manager, Rice, was recruited by BlackRock and joined the
company at the beginning of 2005.260 Two years later, Rice created his own
energy company and used his industry connections from BlackRock to grow
his business and made millions of dollars in loans to the business violating
BlackRock’s private investment policy.261 Senior executives including
Battista were aware of Rice’s business endeavor in early 2007, but they did
not view it as a potential conflict of interest.262 The company did not follow
up to monitor Rice’s actions and, even once they pointed out some concerns
in 2010, Rice was able to continue as both portfolio manager and running his
Battista paid $60,000 for his failures and BlackRock paid $12 million. It
is true that the company had a fiduciary duty to the board of directors and
failed in stopping conflicts of interest with employees.264 Why did the CCO
254. BlackRock, supra note 2, at 1.
255. Id. at 3.
256. Id. at 2.
260. Id. at 3.