U.S. regulators are scrutinizing how hedge funds and other money managers divvy up the stock they get from hot initial public offerings due to concerns that highly lucrative trades are inappropriately enriching a select few, said three people familiar with the matter.
Investment firms typically oversee multiple funds, and the Securities and Exchange Commission is asking how they dole out shares of newly listed companies among those various portfolios, the people said. One worry is that stock is being moved to badly performing funds to bolster returns. The SEC’s examination comes after it found instances in which firms violated securities laws by directing winning trades to their own employees and favored clients.
‘Enforcement 40’ for 2020
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