SEC Probes Insider Trading, Targets Firms Who Bet Against Market Directly Before Downgrade

The SEC has sent subpoenas to several hedge funds and other trading outlets to investigate allegations that insider trading allowed some bigger firms to make trades just before Standard & Poor’s downgraded the country’s AAA rating to AA-plus on August 5.

According to reports SEC officials are specifically targeting company’s who bet against the stock market just before the S&P announcement was made.

At this time it’s still unclear which investment firms are being investigated or what the subpoenas include, although it’s expected they will be broad reaching, asking for information about why specific trades were made directly before the downgrade announcement.

According to the Wall Street Journal the S&P said they have a “longstanding policies and procedures regarding the appropriate handling, use and protection of confidential information.”

The Journal spoke with a an S&P spokesman who said they have:

“Robust policies that prohibit analysts or rating committee members from trading and holding securities or options of the companies or governments they rate.”

At this time the SEC has not announced any official information about their probe.

Do you believe taxpayer dollars should be used to investigate firms that may have received privileged information ahead of market downturns? I’m all for slapping big firms who feel “above the law” on the wrist.