MSNBC – The Securities and Exchange Commission is investigating allegations by two companies that an independent research firm conspired with hedge funds to drive down their stock prices.
The chief US regulator has launched an informal probe into claims by Biovail, a Canadian drugs group, that a hedge fund paid Arizona-based Gradient Analytics to publish “hatchet job” reports on the company. The SEC is also looking into claims by Overstock.com, an online discount retailer, that it was targeted by Gradient, formerly known as Camelback Research. The regulator has issued subpoenas to two journalists working for Dow Jones asking for records of conversations between the reporters and Gradient or Rocker Partners, a hedge fund that specialises in short-selling.
The probes come amid broader claims that some hedge funds manipulate research from Wall Street banks and independent firms. But they also raise concerns about the growing use of legal and regulatory means by companies seeking to silence critics.
Both Biovail and Overstock have launched legal actions against Gradient. Last week, Biovail filed a suit claiming $4.6bn in damages from Gradient, SAC Capital, the $7bn hedge fund founded by Steven Cohen, and David Maris, a pharmaceuticals analyst at Bank of America.
Overstock filed a lawsuit in August alleging Gradient and Rocker Partners worked together in an effort to drive down the company’s share price.
