Federal regulators aren’t just looking into whether Bear Stearns hedge fund managers hedged their holdings in subprime paper by pricing their own holdings at a more attractive rate than those of the public, The Wall Street Journal reports. The Securities and Exchange Commission is investigating more than three dozen firms over whether they should have warned the public earlier over their subprime holdings, they disclosed their risks and how they priced the paper, as well as whether they gave themselves higher values for these securities than their customers.

“As in most investigations, the issue comes down to what did people know and when did they know it,” said Mark Schonfeld, director of the SEC’s New York office. In the past few months, investment firms have written down more than $80 billion in mortgage-related assets.

Among the firms being investigated are UBS, Morgan Stanley, Merrill Lynch, Royal Bank of Canada and Bear Stearns.

However, Walter Ricciardi, deputy director of the SEC’s enforcement division, added, “The fact that we’re investigating does not mean that we have uncovered wrongdoing. We don’t know now that we will be recommending any enforcement actions in the subprime area.”

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