MSNBC – The Senate Judiciary Committee will on Tuesday hold a hearing into hedge funds and their use of independent analysts, an area under scrutiny following high-profile lawsuits by companies thathave been targeted by hedge fund short sellers.
The issue is already under investigation by the Securities and Exchange Commission and the Department of Justice, and is sparking interest among politicians.
Overstock, the online discounter, and Biovail, the Canadian pharmaceutical company, separately have taken legal action against hedge funds that have sold shares they did not own in theexpectation of buying them back at lower prices.
Overstock lodged its suit against Rocker Partners, a leading short-seller, in August last year. Biovail took action against SAC, a large, secretive hedge fund based in Greenwich, Connecticut.
Both cases claim the funds paid an independent researcher, Gradient Analytics, to issue negative reports on the companies. Rocker, SAC and Gradient have all denied the allegations against them.
The Senate hearing, led by Senator Arlen Specter, the committee chairman, is expected to focus on the relationship between hedge funds and independent analysts, and whether there is the potential for collusion and fraud.
