The Securities and Exchange Commission is reportedly investigating whether large brokerage firms are sharing information about big trading blocks, by such companies as large mutual funds, with favored clients, such as hedge funds.

Specifically, the SEC is looking into how pervasive the sharing of market-moving information is in the financial services industry. Although mutual funds have long complained about brokerage firms' front-running their trades for their own benefit, brokerages may now be sharing customer trading information with other existing or potential customers, making the practice more difficult for regulators to detect.

"Mutual fund traders have long complained that their big trades may be being front-run by market participants with inside information about their trades," said Lori Richards, director of the SEC's Office of Compliance Inspections and Examinations.

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