More On Legal & Compliancefrom The Advisor's Professional Library
- Do’s and Don’ts of Advisory Contracts In preparation for a compliance exam, securities regulators typically will ask to see copies of an RIAs advisory agreements. An RIA must be able to produce requested contracts and the contracts must comply with applicable SEC or state rules.
- Advertising Advisor Services and Credentials Section 206 of the Investment Advisers Act contains the anti-fraud provision of the statute and ensures that RIAs advertising and marketing practices are consistent with the fiduciary duty owed to clients and prospective clients.
The former chief operating officer at Harbinger Capital Partners LLC agreed Monday to settle charges by the Securities and Exchange Commission that he assisted a scheme by the firm and its owner Philip A. Falcone to misappropriate millions of dollars from a hedge fund they managed to pay Falcone’s personal taxes.
Peter A. Jenson, who was charged along with Falcone and Harbinger in a 2012 enforcement action by the SEC, has agreed to admit wrongdoing and pay a $200,000 penalty.
Jenson has also agreed to be prohibited from working in the securities industry for at least two years, and agreed to be suspended for at least two years from practicing as an accountant on behalf of any publicly traded company or other entity regulated by the SEC.
The settlement papers were filed in U.S. District Court for the Southern District of New York and must be approved by the court.
Falcone and Harbinger consented to a settlement last year in which they agreed to pay more than $18 million and admit wrongdoing.
“Jenson assisted a fraudulent scheme that allowed Falcone to put his own interests ahead of investors by engaging in a related party loan on favorable terms,” said Julie Riewe, co-chief of the SEC Enforcement Division’s Asset Management Unit, in a Monday statement. “This settlement shows that we hold accountable not only those who perpetrate a scheme, but also those who enable them.”
In his settlement, Jenson admits that with knowledge of Falcone’s and Harbinger’s violations, he provided substantial assistance in connection with the loan by failing to:
Ensure that the lender (Harbinger Capital Partners Special Situations Fund) had separate counsel;
Ensure that the loan was consistent with Falcone’s fiduciary obligations to the Special Situations Fund;
Ensure that Falcone paid an “above market” interest rate on the loan.
Timely disclose the loan to investors; and
Take actions to cause the lender to accelerate Falcone’s payment on the loan once investors in the Special Situations Fund were permitted to begin redeeming their investments.
Related on ThinkAdvisor: