(Bloomberg) — The U.S. Securities and Exchange Commission is investigating the growing role of hedge funds in bankruptcy proceedings on concern money managers are overstating their bond holdings to get access to inside information.
SEC officials are trying to determine whether the funds exaggerate their stakes to gain membership on committees that oversee debt restructurings for bankrupt companies. The creditors’ committees are privy to developments that may affect the value of a company’s bonds, such as takeover offers, before they’re disclosed to the public.
“We’re very actively interested in this area,” said Alistaire Bambach, 44, chief bankruptcy counsel in the SEC’s enforcement division. “These official committees in bankruptcy cases get tremendous amounts of confidential information, and there’s clearly a risk that they’re not all trading cleanly and by the book.”
