By Svea Herbst-Bayliss and Katya Wachtel
BOSTON/NEW YORK, Oct 7 (Reuters) - Hedge fund manager PhilipFalcone, banned from the securities industry for five years byU.S. regulators, is also being banned for seven years fromdecision-making roles at Fidelity & Guaranty Life Insurance, aunit of his firm, New York officials said on Monday.
Falcone is "banned during that period from serving as anofficer or director of Fidelity & Guaranty Life and itssubsidiaries or any New York-licensed insurer, as well asparticipating in the selection of any such officers ordirectors," the New York State Department of Financial Servicessaid.
Fidelity & Guaranty Life is a unit of Harbinger Group, whichis majority-owned by Falcone's Harbinger Capital. The insuranceunit is planning to sell shares to the public.
The agreement does not require him to sell any of hisinterest in the insurance operator, according to a personfamiliar with the matter.
Falcone is also forbidden from "exercising direct orindirect control over the management, policies, operations, andinvestment funds" of Fidelity & Guaranty Life or any other NewYork-licensed insurers, according to a press release from thestate agency. The ban also applies to the employees of HarbingerCapital Partners.
Falcone said in a statement that he has "not been involvedin the day-to-day management of F&GL or its investmentdecisions, and I will not be in the future."
He added that "Harbinger Capital and I recognize theimportance of the guidelines established by the New York StateDepartment of Financial Services under this commitment, and weare committed to ensuring that the management of F&GL isconsistent with those guidelines."
Falcone admitted wrongdoing and agreed to pay an $18 millionfine to the U.S. Securities and Exchange Commission in August tosettle civil fraud charges that he improperly used Harbingerhedge fund money and favored some of his investors.
The agreement was the first to require a defendant to admitwrongdoing since SEC Chairman Mary Jo White announced a muchtougher policy in June that would require such admissions moreoften.
The SEC settlement said it "may have collateral consequencesunder federal or state law and the rules and regulations ofself-regulatory organizations, licensing boards, and otherregulatory organizations."
Falcone rose to fame on Wall Street for betting against thesubprime mortgage market in a move that saw his New York-basedfirm reach $26 billion in assets. However, the fund was hit bysteep losses in recent years due to a failed wireless startup,LightSquared Inc.
- Investment & Company Information
- Philip Falcone
- Harbinger Capital