By Cyril Tuohy
New York state regulators have banned Philip A. Falcone, head of Harbinger Capital Partners and a director at Fidelity & Guaranty Life (F&GL), from exercising “direct or indirect control” over any New York-licensed insurer for seven years, the New York Department of Financial Services (DFS) announced.
The ban, issued by New York Superintendent of Financial Services Benjamin M. Lawsky, also applies to the employees of Harbinger Capital.
Lawsky said the action was “vital” to putting policyholders first and to ensure “the utmost integrity” among life and annuity companies. Many private equity investment firms have taken ownership stakes in these life and annuity companies.
“DFS will continue to work to protect retirees and annuitants when private equity firms purchase insurers,” he said in a news release. “We look forward to continuing to work with other insurance regulators on these important issues.”
Falcone, in an email statement through his public relations representative, said, “I have not been involved in the day-to-day management of F&GL or its investment decisions, and I will not be in the future.”
“Harbinger Capital and I recognize the importance of the guidance established by the New York Department of Financial Services under this commitment, and we are committed to ensuring that the management of F&GL is consistent with those guidelines,” Falcone also said.
The ban follows a settlement between Harbinger Capital and the Securities and Exchange Commission in which Harbinger agreed to pay $10.5 million in fines in connection with an undisclosed loan in 2009 of $113.2 million from one of its funds to pay a tax liability.
The transactions were in violation of federal securities laws, including the Investment Advisors Act of 1940, the SEC said.
Fidelity & Guaranty Life of New York has also agreed to implement protections similar to those agreed to by private equity companies Guggenheim Partners and Apollo Global Management, both of whom have bought annuity companies.
The agreements are meant to protect long-term annuitants from the short-term “time-fuse” investment interests of private equity companies.
Fidelity & Guaranty Life of New York has agreed to maintain specified capital levels and to establish a trust account of $18.5 million to replenish the company’s capital levels should they dip below the 450 percent threshold, Lawsky also said.
Earlier this year, Guggenheim Partners agreed to the policyholder protections as part of its purchase of Sun Life Insurance and Annuity Co. of New York. Apollo Global agreed to similar safeguards in connection with Athene Holding Ltd.’s $1.55 billion purchase of the annuity operations of Aviva USA.
Aviva USA includes Aviva Life and Annuity Co. and its Aviva Life and Annuity Co. of New York subsidiary.
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].
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