Questions rise as to trade before ratings cut

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As if having the U.S. lose its stellar credit rating wasn’t enough, the Securities and Exchange Commission is investigating whether some hedge funds and specialized trading firms profited from the debt downgrade through alleged insider trading, the Wall Street Journal reported on Tuesday.

The newspaper, quoting people familiar with the matter, said the probe is focusing on firms that bet stocks would plummet (as they did) after Standard & Poor’s slashed the U.S. debt rating a notch to AA+ from AAA on Aug. 5.

The article didn’t name specific companies. It said, however, that a person familiar with the matter told the Wall Street Journal that investigators were asking who at the firms had heard first about the debt downgrade, how they got that information and when they got it. The SEC declined to comment, the Wall Street Journal reported.

Full Story: US probes trades prior to ratings cut