SEC Probes UBS Rating Leak

Securities regulators are investigating an allegation that at least one employee at UBS (UBS) was involved in improperly providing advance notice of upcoming changes in analyst stock recommendations, sources say.

The investigation by the Securities and Exchange Commission of the Swiss-based financial services giant is believed to be in its initial stages.

A source familiar with the investigation says regulators are looking into a report that traders could get a one-day heads-up on various rating changes on stocks. The alleged activity ended a few months ago, the source says. But it supposedly took place for at least a year.

A spokesman for the SEC declined to comment. A UBS spokesman says the firm "generally does not comment on communications with the SEC."

Details of the investigation are sketchy. It's not clear what the UBS employee or employees got in return for providing the advance notice. It's also unclear whether the traders were getting specific information about upcoming downgrades and upgrades, or simply advance notice that a rating change on a stock was imminent.

The allegations come as regulators and prosecutors are investigating other misuses of confidential information on Wall Street.

For nearly three years, investigators have been looking into allegations that investors in so-called PIPEs -- or private investments in public equity -- have been using confidential information about these financing deals to improperly profit from stock declines. In a PIPE deal, a company typically sells shares at a sharp discount to their market price.