Regulator Wins First Admission Of Guilt From Financial Firm Since Policy Shift

Posted on

"Regulator Wins First Admission Of Guilt From Financial Firm Since Policy Shift"

SEC 3:2A hedge fund manager who manipulated bond markets and misused investor funds has admitted his guilt and accepted a five-year ban from the securities industry. It is the first settlement to feature an admission of guilt since the Securities and Exchange Commission (SEC) announced in June that it would reexamine the common practice of so-called “neither admit nor deny” settlements.

Phil Falcone used $113 million in Harbinger Capital Partners assets to pay his personal taxes and rigged prices on a particular set of bonds in order to benefit the firm. He and other Harbinger partners will pay an $18 million fine, but it is the trading ban and acknowledgment of wrongdoing that set this deal apart. The Falcone case had been on the verge of being settled without an admission of guilt and with just a two-year ban for the hedge fund manager, when SEC Chairman Mary Jo White reportedly intervened to insist upon a tougher outcome.

For years after the financial crisis, the SEC’s settlements allowed financial companies and traders to pay a fine and get back to work. Under pressure from Sen. Elizabeth Warren and a pair of federal judges, White announced in June that she had ordered a review of the commission’s policy around “neither admit nor deny.” The commission has been building a list of other cases where it will seek admissions of guilt, including a high-profile case against JP Morgan.

As the first settlement to come under the shift in policy, the Falcone case could send signals to the industry about which sorts of wrongdoing the SEC intends to target. An SEC spokesman told ThinkProgress in June that the commission was not picking its first admission of guilt case with the intent of making a splash, however. “You don’t choose which cases would be first because of how much deterrent effect the individual case would have,” the spokesman said.

« »

By clicking and submitting a comment I acknowledge the ThinkProgress Privacy Policy and agree to the ThinkProgress Terms of Use. I understand that my comments are also being governed by Facebook, Yahoo, AOL, or Hotmail’s Terms of Use and Privacy Policies as applicable, which can be found here.