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Tuesday
Sep202011

SEC Subpoenas Firms on Possible Insider Trading before US Downgrade

Ryan McVay/Thinkstock(WASHINGTON) -- Federal financial regulators have reportedly stepped up their investigation into cases of possible insider trading before the U.S. government's credit rating was downgraded last month.

Citing people familiar with the matter, The Wall Street Journal says the Securities and Exchange Commission wants to know more about traders who bet the stock market would tumble just before Standard and Poor's downgraded the U.S. from its triple-A rating on Aug. 5.  Those trades could have been hugely profitable.

SEC regulators have issued subpoenas, demanding more information from hedge funds, specialized trading shops and other firms, according to the Journal.  But it may be difficult to prove wrongdoing -- the downgrade was rumored for weeks, especially in the hours before the announcement was made.

Copyright 2011 ABC News Radio

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