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Mass. to Probe Bear Stearns over Funds: WSJ

Bear Stearns is being investigated by Massachusetts securities regulators over whether the bank improperly traded with two in-house hedge funds that collapsed last summer, the Wall Street Journal reported on Friday.

The paper, citing sources, said state investigators are trying to determine whether the bank traded mortgage-backed securities for its own account with the hedge funds without notifying the fund's independent directors in advance, the paper said.

Massachusetts claims jurisdiction because some residents invested in the Bear Stearns High-Grade Structured Credit Strategies Fund and the High-Grade Structured Credit Enhanced Leverage Fund, both of which collapsed last summer leaving losses of $1.6 billion, the paper said.

Investigators are also seeking to determine if some troubled securities traded by the bank were offloaded into the hedge funds and whether they were priced properly, the paper said.

The collapse of the Bear Stearns funds are being investigated by the U.S. Securities and Exchange Commission and federal prosecutors, the paper said.

A bank spokesman said it is cooperating with all investigations, but declined to say if Massachusetts is one of them, the paper said.