Cornell Capital Partners, a hedge fund that specializes in finance for ailing penny-stock companies, is being investigated by securities regulators for its trading activity in shares of nine companies. The Jersey City, N.J.-based hedge fund, which has more than $200 million in assets, disclosed the investigation in its most recent audited financial statement, a copy of which was obtained by TheStreet.com. Copies of the hedge fund's 2004 financial statement were mailed to Cornell investors in late August. The Securities and Exchange Commission investigation of Cornell stems from a broad-based regulatory inquiry into allegations of manipulative trading in the $17 billion-a-year market for PIPEs, the Wall Street acronym for private investment in public equity. For the past two years, securities regulators have been looking into the activities of hedge funds that invest in PIPEs and the brokerages that help arrange these private stock sales for companies in desperate need of cash. TheStreet.com previously reported that at least three other hedge funds -- HBK Investments, Gryphon Partners and Alexandra Investment Management -- are being investigated by regulators. PIPEs are a popular financing route for tiny, cash-strapped companies, which raise money by selling discounted shares to investors in a privately negotiated transaction. But the ability of a big trader to purchase thousands of shares of discounted stock also makes the PIPEs market ripe for abuse by unethical short-sellers -- traders who bet a stock will decline in price. Mark Angelo, the founder and president of Cornell, says regulators haven't told him they've found any wrongdoing involving the hedge fund. Angelo says Cornell is probably being investigated because it's a major PIPEs player and is involved in so many deals each year. "I think they're looking at all people in the PIPEs space,"' says Angelo. "Most of our investors view it as non-issue."