SEC, Falcone reach new settlement deal after first rejection

Billionaire fund manager Philip Falcone agreed to a five-year ban from the financial industry and will admit wrongdoing to settle charges by the U.S. Securities and Exchange Commission that he improperly used money from his hedge fund and unfairly favored some of his investors, the SEC announced on Monday.

The new settlement agreement between Falcone and his hedge fund, Harbinger Capital, and the SEC comes after the Commission rejected an earlier proposal because it was too lenient.

As part of the agreement, Falcone will have to personally pay around $11.5 million in disgorgement and fines, while Harbinger Capital will pay $6.5 million, according to the SEC's announcement.

Philip Falcone, chairman and chief executive officer of Harbinger Group Inc.
Jacob Kepler | Bloomberg | Getty Images
Philip Falcone, chairman and chief executive officer of Harbinger Group Inc.

Falcone will be banned from associating with brokers, dealers, investment advisers and other types of financial firms for five years, after which he will be able to reapply for a license to operate. During that period he will be allowed to help with the liquidation of Harbinger under the supervision of an independent monitor, the announcement said.

In a statement, Falcone said Harbinger is not closing down, although it will have to meet customer redemptions.

He blamed "poor legal advice" for his problems and said he is "happy to get on with my life and continue the focus of building Harbinger Group, Inc. and LightSquared."

In a later email to CNBC, Falcone asked that his reference to legal advice be removed from his statement.

A few minutes later, Falcone emailed this revised statement:

I am pleased that we were able to reach a settlement with the SEC. I believe resolving these issues is the best course of action for me and our investors. Doing so will allow continued focus on our permanent capital vehicles and on maximizing the value of LightSquared for all stakeholders. While we are committed to efficiently meeting redemptions, I remain fully focused on continuing to manage Harbinger Capital's portfolio for the benefit of our investors.

- By Reuters with contributions from