Details via The Motley Fool:

Will the SEC Trim the Hedges?

By Rich Duprey (TMF Cop)
January 12, 2006

News that the Securities and Exchange Commission gave a Wells notice to a hedge fund because of its actions in the failed merger of generic drug manufacturers Mylan Laboratories and King Pharmaceuticals is sending out tiny ripples in the hedge fund community. The regulators have sent notice that they don't want hedge funds influencing mergers if they don't risk losing any money in the deal.

Private investment partnerships, otherwise known as hedge funds, can serve as a counterbalancing influence on corporate management. Because they seek to maximize returns for their investors, hedge funds many times take large positions in companies and then make a lot of noise to force actions that increase the value of that position. Individual investors like you and I can enjoy the ride as the value of our shares increases alongside those of the fund...

Inevitably this statment is followed by a "but"... Click through to the full piece for some rubber-meets-the-road details. And if you want more on the Mylan merger story, click here for info on the SEC's Wells Notice sent to Hedge Fund Perry Capital.

-- MDT