The SEC's enforcement unit demanded information from investment banks including Goldman Sachs Group Inc, Deutsche Bank AG and Merrill Lynch & Co, according to two of the people, who declined to be identified because the inquiries aren't public. The Washington-based regulator is seeking trading records and e- mails, one of them said.
The subpoenas mark a new front in the broadest US investigation of Wall Street trading since state and federal regulators targeted mutual-fund abuses in 2003.
The SEC issued an emergency order yesterday curtailing short selling in financial stocks, including Lehman and mortgage-finance companies Fannie Mae and Freddie Mac. The agency also is examining whether securities firms have adequate controls to thwart misconduct.
"The SEC is trying to determine whether there was illegal manipulation of market prices, and that is far easier to do if you have a broad sweep,"' said Tamar Frankel, a law professor at Boston University.
SEC Chairman Christopher Cox, 55, told the Senate Banking Committee yesterday the agency is investigating whether illegal trading contributed to the collapse of Bear Stearns in March and the 80 percent drop in the market value of Lehman Brothers this year.
The probe focuses on traders who seek to profit by intentionally spreading false information about the New York- based firms.
SEC spokesman John Nester declined to comment on the subpoenas, as did Deutsche Bank spokesman Ted Meyer, Goldman spokeswoman Andrea Raphael and Merrill spokesman Mark Herr. It is Merrill's policy to cooperate with regulators, Herr said.
Former Bear Stearns Chief Executive Officer Alan Schwartz and Richard Fuld, the head of Lehman, have contacted Goldman CEO Lloyd Blankfein, asking whether Goldman traders spread misleading information about the firms, the Wall Street Journal reported today, citing people familiar with the matter.
