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[marketmaven]

CROOK NEWS: Brokerages use crack PIPES to manipulate stocks

Brokerages Subpoenaed in Hedge Fund Finance Probe
By Matthew Goldstein TheStreet.com Senior Writer
5/18/2004 2:18 PM EDT

Nearly 20 brokerages have been subpoenaed by federal regulators investigating hedge funds that made direct investments in publicly traded companies, a sometimes shady area of last-resort finance that has burned unsuspecting investors in the past. The subpoenas, issued over the past two months, are part of an ongoing investigation by the Securities and Exchange Commission into allegations of stock manipulation by hedge funds involved in the transactions, which are known on Wall Street by the acronym PIPE, for private investment in public equity. Regulators want information about any role the brokers may have played introducing the hedge funds to companies seeking to enter into PIPE deals. The SEC has been looking into the PIPEs market for nearly two years. The deals can be ripe for abuse since they often are negotiated in secret between savvy investors and companies with an urgent need for money. Since the deals are put together quickly, they usually don't undergo the SEC scrutiny to which most initial public offerings and bond deals are subject.