Falcone agrees to 5-year industry ban


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The Independent Online

Philip Falcone, the billionaire investor behind the Harbinger Capital hedge fund, has agreed to a five-year ban from the financial industry as part of settlement with US regulators over charges that he misused money from the fund and secretly favoured some clients at the expense of others.

Mr Falcone and Harbinger, which was among the funds that shorted HBOS stock during the financial crisis, have also agreed to a pay fine of more than $18m. The deal, which was announced by the US Securities and Exchange Commission (SEC) last night, comes after an earlier proposal was rejected by the regulator’s commissioners, reportedly because of concerns that it was too lenient. “Falcone and Harbinger engaged in serious misconduct that harmed investors,” Andrew Ceresney, the co-director of the SEC’s enforcement arm, said.

The settlement, which needs to be approved by a New York court, will do little to dent Mr Falcone’s net worth, which has been estimated at $1.2bn by Forbes magazine. But it marks a spectacular fall for the tycoon, who as part of the deal has admitted to improperly borrowing around $113m from a Harbinger fund at an interest rate less than that being paid by the fund itself to meet his personal tax obligations.

The loan was taken out at a time when Mr Falcone had “barred other [fund] investors from making redemptions, and did not disclose the loan to investors for approximately five months,” the SEC said.