Feds Launch Probe of Stock Loan Abuses

Federal prosecutors have launched a broad probe into price-gouging in the market for borrowed stock, targeting Wall Street firms that allegedly attach gratuitous finder's fees for arranging stock loans.

Among other things, prosecutors are probing allegations that employees of Wall Street trading desks are receiving kickbacks in return for lending stock, say lawyers familiar with the inquiry.

Stock lending has been a hot-button issue on Wall Street for a year, primarily for its role in an ongoing probe of short-selling abuses. But the finder's fee investigation is separate. It centers on a belief among regulators that some firms effectively impose a tax on small brokerages that are under intense pressure to locate and lend shares to hedge funds looking to make bearish bets. ...