On June 26, 2012, the SEC filed three separate complaints relating to securities law violations allegedly committed by Philip A. Falcone, his investment advisory firm, Harbinger Capital Partners LLC (Harbinger) and other entities and individuals. In the first complaint, the SEC charged Falcone, Harbinger and Peter Jenson, a former Managing Director and Chief Operating Officer of Harbinger, with violations of the federal securities laws in relation to the misappropriation of client assets (through the making of a $113.2 million loan from a fund managed by Harbinger to Falcone to pay his personal taxes) and the granting of undisclosed preferential redemption rights to certain investors. See “Key Legal Considerations in Connection with Loans from Hedge Funds to Hedge Fund Managers
,” Hedge Fund Law Report, Vol. 3, No. 28 (Jul. 15, 2010). In the second complaint, the SEC charged Falcone, Harbinger Capital Partners Offshore Manager, L.L.C. and Harbinger Capital Partners Special Situations GP, L.L.C. with engaging in an illegal short squeeze to manipulate bond prices. In the third complaint, the SEC charged Harbert Management Corporation, HMC-New York, Inc. and HMC Investors, LLC with control person liability in relation to the alleged market manipulation described in the second complaint. Separately, the SEC issued an order settling claims with Harbinger related to violations of Rule 105 under Regulation M
. This article details the charges levied by the SEC in the three complaints and details the terms of the settlement with Harbinger related to the Rule 105 violations.