All budding bromances have their challenges.

So Fidelity and BlackRock are under the microscope with the SEC, that much we know. But now it appears the reason the regulators are combing through the firms' dealings is because of their large, questionable subsidiaries that might be far too removed from traditional 'Merican asset management, or so Andrew Ackerman and Ryan Tracy of the Wall Street Journal report.

Ian Katz and and Jesse Hamilton at Bloomberg broke the news in November that that the regulators were looking at the two firms as potential "too big to fail" cases and how they might pose risks to the general financial system. Now it seems the businesses in question are BlackRock's $200 billion U.K. life-insurance subsidiary and Fidelity's $75 billion brokerage business.

But regulation is by far not the only way the two firms' paths have crossed lately, MFWire reported just yesterday that Fidelity is starting a new managed account platform using BlackRock's iShares. Earlier this month, multiple reports also cited Fidelity's chairman Ned Johnson looking to build a trading venue for asset managers and enlisting BlackRock's help. And last year, the two firms formed a partnership for commission-free ETF trading.

Looks like Johnson and BlackRock's Larry Fink will be spending a lot of time together. And it could be the best of times, or the worst of times, for these bros in training.

But one thing's for sure. BlackRock is ready for the watchdogs. Barbara Novick, BlackRock's vice chairman, pretty much said her firm welcomes regulatory changes, while speaking at a Hedge Fund Association event on Wednesday.

She formed the Government Relations Steering Committee at BlackRock after the 2008 market crisis, as a way to tackle regulation issues head on. "We have to embrace regulatory changes, not just push them away," she said at the HFA event. So you heard the woman, bring it on! 

Edited by: Anastasia Donde


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