WASHINGTON (Reuters) – Several U.S. investigations into subprime lenders involve possible insider trading before announcements of negative news about the lender, a Securities and Exchange Commission member said on Friday.

SEC Commissioner Elisse Walter said the agency is looking at whether subprime lenders properly accounted for loan loss reserves, impairment of asset values and whether they overvalued foreclosed property and other assets.

In remarks to a congressional hearing, Walter also said the SEC was looking at whether subprime lenders properly disclosed information, including data regarding loan quality, credit risks and the amount and types of subprime exposure.

She also told the U.S. House of Representatives Financial Services Committee that the SEC has 'dozens' of active investigations involving individuals associated with hedge funds.

"The SEC has become particularly concerned about possible hedge fund offering frauds, where fraudsters use the nontransparent and largely unregulated status of hedge funds to conceal large Ponzi schemes," Walter said.

The SEC, which has been criticized for not uncovering Bernard Madoff's $65 billion investment fraud earlier, has filed enforcement cases in the past two years against more than 75 Ponzi schemes -- where early investors are paid from money coming in from new investors.

In February, SEC staff said the agency expected to file additional subprime related enforcement actions and had dozens of very active investigations underway.

Walter said on Friday that the agency was also probing the possible intentional mispricing of securities and the knowing underwriting of securities based on collateral likely to default.

In addition, credit rating agencies, home builders and companies that provided retail mortgages to consumers were being probed.

"An investigation of a home builder might entail possible financial fraud, such as improper quarterly earnings management or improper recognition of revenue on model home sales and leasebacks," she said.

RUMORS AND MANIPULATION

Amid extreme market volatility in 2008, the SEC and other securities regulators announced plans to crack down on rumor-mongering that threatens financial institutions.

Since then, the SEC has opened a group of related investigations into the possible manipulation of the securities of six large financial issues involved in the recent market turbulence, Walter said. The companies were not identified.

In October 2008, the agency required large hedge funds, broker-dealers and other large investors to file statements under oath regarding trading and market activity in the securities and credit derivatives of financial firms.

SEC staff have been analyzing the data and focusing on claims that credit derivatives such as credit default swaps were being used to manipulate equity prices. Walter said that investigation has been split into "six separate investigations, which are proceeding as expeditiously as possible."

Courtesy of news.yahoo.com