BlackRock Inc. (BLK), the world’s largest asset manager, said one of its employees is facing a civil proceeding by an Italian securities regulator that alleges he used nonpublic information to avoid 114.5 million euros ($156.5 million) in losses for clients last year.
Commissione Nazionale per le Societa e la Borsa, or Consob, alleges that Nigel Bolton, a money manager who heads the European equity team of BlackRock Investment Management (UK) Limited, sold shares of oil and gas company Saipem SpA (SPM) before it announced negative news, BlackRock said yesterday in a regulatory filing. While BlackRock wasn’t charged, Consob said the firm declined to provide it with information and hindered the investigation.
“Our portfolio manager made the decision to sell Saipem shares based on a growing wave of negative publicly available information that was widely disseminated in the marketplace,” Brian Beades, a spokesman for the New York-based firm, said in a statement. “We believe we have fully cooperated with Consob, and we will continue to do so.”
BlackRock, which emerged largely unscathed from scandals including one in 2003 when competitors were accused of market timing, has drawn regulatory scrutiny recently. The firm on Jan. 8 agreed to end an analyst survey program that New York’s Attorney General concluded could be used to execute trades based in part on nonpublic information. In December, BlackRock said it complied with Italian disclosure requirements after Consob said the firm may have broken rules by failing to report a stake increase in Telecom Italia SpA.
The filing said the sale of the Saipem shares, made on behalf of BlackRock clients, occurred between Jan. 25 and Jan. 29, 2013. Saipem declined 34 percent on Jan. 30, 2013.
The shares plummeted after an announcement that profit would be less than half the amount expected. The company’s chief executive officer had previously left amid a corruption investigation in 2012, which wiped more than 4 billion euros ($5.5 billion) from Saipem’s value.
BlackRock conducted its own investigation and found no evidence to support the Consob’s allegations, according to the filing.
“It’s a very positive statement to put out there and they’re anxious and eager to get in front of it,” Mark Hanchet, a partner at law firm Mayer Brown who specializes in international litigation on behalf of financial institutions, said in a telephone interview. “You don’t want leave the impression out there of the possibility you’re overlooking something or complicit somehow.”
BlackRock said it may be liable for the actions of its employee and that under Italian law, the potential penalty can be greater than the loss avoided.
“BlackRock believes that Mr. Bolton will not be found liable and, as a result, neither Mr. Bolton nor BlackRock will incur any penalty,” the company said in the filing. “None of BlackRock’s clients or any of the funds managed by BlackRock will be affected by these proceedings.”
BlackRock’s European equity team has about $40 billion in assets, of which Bolton manages about $14 billion, according to the filing. BlackRock manages $4.1 trillion in assets worldwide.
“Insider trading is abhorrent to BlackRock’s values, and we would never tolerate it,” Beades said.
Money managers are facing regulatory scrutiny following insider-trading investigations and a review of whether bigger firms pose a systemic risk to the markets.
As part of the Jan. 8 settlement with New York Attorney General Eric Schneiderman, BlackRock agreed to pay the state $400,000 to cover the cost of the investigation. BlackRock didn’t admit or deny the attorney general’s findings, according to a copy of the agreement provided by Schneiderman’s office.
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