Front-running: Is Wall Street tipping off HFs?

The SEC has launched a probe into allegations that Wall Street firms might be tipping off certain customers, namely hedge funds, before large trades are made by mutual funds, a practice often referred to as "front-running".

An SEC spokesman said that the regulator “is looking into potential information leakage that could be unfairly benefiting customers at the expense of others.” He added that all the big firms on Wall Street would be investigated, and that hedge funds would be among those that might be being tipped off, but are not necessarily the only investor base receiving such information.

A high level of complaints from mutual funds has apparently prompted the SEC to take action.

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