CFO.com Magazine – The Securities and Exchange Commission is investigating the increasing role played by hedge funds in bankruptcy proceedings and whether fund representatives are lying about the size of their stakes to gain critical, sensitive information, according to Bloomberg.
Hedge funds that specialize in investing in the securities of distressed companies often try to buy up a large portion of a senior class of bonds so as to gain a position on the creditors’ committee of a company. That committee typically has a huge say in the company’s ultimate restructuring and is privy to insider information.
