SEC charges Carl Icahn and his IEP securities for irregularities

On Monday, IEP and Icahn agreed to pay $2 million ($1.5 million and $500,000 respectively) in civil penalties, to settle the SEC’s charges.

Without admitting or denying the findings, IEP and Icahn, 88, agreed to cease and desist from future violations and to pay the civil penalties.

Icahn’s margin borrowing was highlighted in a report issued by Hindenburg Research in May last year. He consolidated and amended his margin borrowings in July, two months after the Hindenburg report, according to the SEC’s consent order.

SEC said that Icahn, as the controlling shareholder of IEP, pledged approximately 51 to 82 percent of IEP’s outstanding securities as collateral to secure personal margin loans under agreements with various lenders. Icahn’s cumulative personal borrowing was as much as $5 billion, the SEC said.

IEP failed to disclose Icahn’s pledges of IEP securities in the mandatory Form 10K until February 25, 2022.

Icahn also failed to file amendments to Schedule 13D describing his personal margin loan agreements and amendments, which dated back to at least 2005, and failed to attach required guaranty agreements. SEC said Icahn’s failure to file the required amendments to Schedule 13D persisted until at least July 9 last year.

The SEC’s orders find that IEP violated Section 13(a) of the Securities Exchange Act of 1934 and Rule 13a-1 thereunder and that Icahn violated certain beneficial ownership reporting provisions of the Exchange Act.

Osman Nawaz, Chief of the SEC Enforcement Division’s Complex Financial Instruments Unit (CFIU), said: “The federal securities laws imposed independent disclosure obligations on both Icahn and IEP. These disclosures would have revealed that Icahn pledged over half of IEP’s outstanding shares at any given time.

“Due to both disclosure failures, existing and prospective investors were deprived of required information.”