Federal regulators next step toward corporate cleansing is checking whether banks are pressuring affiliated mutual fund units to buy into those banks initial public offerings, The Wall Street Journal reports.
While quick to point out to The Journal that no evidence has yet been uncovered, the Securities and Exchange Commission did express concern about the possible conflict of interest.
An official told the newspaper, "The SEC initiated a nonpublic examination review of mutual-fund firms affiliated with investment banks to look at their holdings and the investment decision-making process and whether theres any influence exerted by the firms investment-banking side."
Since many investment banks own mutual funds, the SEC is worried that banks may be unfairly taking advantage of their relationship to fund companies, in the process harming investors. While laws do not prohibit funds to buy into related investment banks, regulations do state that investors interests should always come first.