Hedge Fund Front Running or More Lazier Faire / More Corruption

SEC probes trading at hedge funds

Regulators seek data from brokerages on possible insider activity that hurts mutual funds.
By Walter Hamilton, Times Staff Writer
February 7, 2007

Underscoring the growing clout of hedge funds, federal regulators are seeking to determine whether Wall Street stock brokerages routinely leak sensitive trading information to people running these investment vehicles.

The probe by the Securities and Exchange Commission grows out of concerns by mutual funds that brokerage traders are tipping off hedge fund managers to upcoming orders to trade large quantities of stock, giving the hedge funds a chance to buy or sell ahead of the order, said a person with knowledge of the investigation.

Such "front running" hurts the mutual funds (and their individual investors) by making stocks they are selling less valuable, and stocks they are buying more expensive.

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