SEC Sends Wells Notice to Harbinger Capital

The U.S. Securities and Exchange Commission seal hangs on the facade of its building in Washington, DC.
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The U.S. Securities and Exchange Commission seal hangs on the facade of its building in Washington, DC.

The enforcement division of the Securities and Exchange Commission is recommending the agency take action against Philip Falcone and his hedge fund, Harbinger Capital, according to a regulatory filing.

The hedge fund and its founder received a Wells Notice from the SEC, which indicates that SEC investigators are recommending a lawsuit alleging a violation of federal securities laws. The Commission has not said whether it will pursue an action against Harbinger.

The Wells Notices, which also went to Harbinger’s president and general counsel, were disclosed in a filing Friday by Spectrum Brands Holdings and its majority shareholder, Harbinger Group, which is controlled by Harbinger Capital Partners.

“If the SEC decides to bring an enforcement action, HCP and its affiliates intend to vigorously defend against it,” Harbinger said in its SEC filing.

The filings did not specify the nature of the allegations against Harbinger and its executives beyond noting that they involve “violations of the federal securities laws’ anti-fraud provisions in connection with matters previously disclosed, and an additional matter regarding the circumstances and disclosure related to agreements with certain fund investors.”

Falcone took out a $113 million personal loan from Harbinger in October 2009. Although it was repaid in full by the end of 2010, The Wall Street Journal reported last year that the SEC was investigating whether Harbinger failed to disclose the loan in a timely manner to investors.

In the filing, Harbinger noted that a Wells Notice “does not constitute a determination that the recipients have violated any law.” Although the SEC can decline to follow the recommendation of the enforcement division, in practice this is very rare.

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