The Securities and Exchange Commission in Washington.

The Securities and Exchange Commission is investigating whether hedge funds and other investors are improperly selling shares of privately held technology companies, according to a report.

The investigation, which is in its early stages, comes amid a recent surge in the trading of pre-IPO shares, The Wall Street Journal reported Sunday, citing sources close the investigation.

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The SEC is also investigating the increase in firms selling employee shares of private companies through derivative transactions, which is forbidden by some companies, according to the report. The activity could also violate the Dodd-Frank Act of 2010.

Valuations of private technology firms have soared and companies have choose to remain private for longer, making shares of said firms an even hotter commodity.



The SEC declined to comment on the report.

Click here to read the full report from The Wall Street Journal.