The Securities and Exchange Commission signaled it was taking a harder line on Wall Street’s rampant problem with fraud by extracting its first admission of wrongdoing from Philip Falcone, CEO of Harbinger Capital Partners.
Falcone admitted to market manipulation and as part of a settlement will pay $18 million in fines in addition to being banned from trading for five years. He was accused in June 2012 of manipulating the market by improperly using $113 million in fund assets to pay his own taxes and to favor some customer redemption requests secretly over others.
The deal comes a month after the SEC overruled its own enforcement staff to reject an earlier settlement last month. The original agreement called for a two-year ban from raising new capital and no admission of wrongdoing and did not include an injunction against committing fraud in the future. According to reports the SEC’s new chairwoman Mary Jo White said people were increasingly frustrated with the agency because of its lax oversight and punishments.
The new agreement reflects a wider policy change in the Obama Administration, which has been criticized for failing to go after market manipulators and to tackle the problem of fraud on Wall Street. The DOJ announced last week it was filing criminal charges against two JPMorgan Chase traders who lost $6 billion last year from risky derivatives trading. Monday’s agreement between Falcone and the SEC sets a precedent for future cases including those involving JPMorgan Chase and the hedge fund SAC Capital Advisors.