The same year that Falcone took out the loan, he let some large investors pull their money from his funds in return for their vote to approve a plan to restrict client redemptions from a different fund. Harbinger concealed these deals from the independent directors and fund investors, according to the SEC.
The agency also accused Falcone and two of his funds of engaging in a short squeeze of MAAX Holdings Inc. bonds, a transaction in which a buyer limits the supply of a security to drive up prices and cause losses for investors betting against the security.
Falcone will continue his role as chief executive officer of Harbinger Group, the $1.28 billion public holding company he controls.
White and two Democratic commissioners last month voted against the proposed settlement because they were concerned the deal didn’t include a public-company ban, two people with knowledge of the matter said at the time, asking not to be named because the deliberations weren’t public.
The SEC agreed to settle the case without extracting that penalty because Falcone’s misconduct stemmed from his work as a registered investment adviser and not as a public-company director, another person familiar with the matter said yesterday.
Regulators also decided the bar from serving as a director wasn’t necessary because Falcone admitted to conduct that may serve as a warning to investors in his companies, the person said. Under the agreement, Falcone can assist with the liquidation of Harbinger’s hedge funds but can’t raise any new money.
Falcone has said he planned to move away from hedge-fund investing, where clients can pull out their money at regular intervals, and instead use Harbinger Group to finance long-term investments.
Harbinger Group shares gained 2.9 percent yesterday to $8.95. They have gained 16 percent this year.
LightSquared filed for bankruptcy in May 2012, listing assets of $4.48 billion and debt of $2.29 billion. It sought bankruptcy protection to reorganize while seeking regulatory approval of its wireless spectrum. U.S. regulators blocked the service in 2012 after GPS-device makers and users -- including the U.S. military and commercial airlines -- said signals from LightSquared’s service would confound navigation gear.
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