NovaStar Financial ( NFI) was among the biggest losers on the New York Stock Exchange Tuesday after it disclosed being the subject of an informal Securities and Exchange Commission investigation. The company said the inquiry followed media reports raising questions about whether it was authorized to do lending business in certain states. "To its knowledge, NovaStar is currently approved and authorized to do business in every state in which it operates," the company said in a statement. "We have informed the SEC that we will cooperate fully with this inquiry and will resolve all of its questions." The April 12 edition of The Wall Street Journal reported that NovaStar had compliance issues with certain state licensing agencies. "Receiving this notice was not surprising in the aftermath of a widely circulated newspaper story. As the SEC stated in its letter, this inquiry 'should not be construed as an indication by the Commission or its staff that any violations of law have occurred,'" NovaStar said in a statement, quoting its outside counsel. "NovaStar is confident that a full review of the facts should put this matter behind it." The shares were recently down $6.91, or 17.7%, to $32.10.