(Bloomberg News) Tiger Asia Management LLC, the New York-based hedge-fund firm led by Bill Hwang, received a subpoena from the U.S. Securities and Exchange Commission, following allegations of insider trading by Hong Kong's securities regulator.

The SEC has requested trading records and other documents, Tiger Asia told investors in a letter dated October 12. The firm said it assumes the subpoena was prompted by the probe in Hong Kong, according to the letter, a copy of which was obtained by Bloomberg News.

The Hong Kong Securities and Futures Commission in August of last year applied for a High Court injunction to freeze some Tiger Asia assets, saying the firm had engaged in insider dealing and market manipulation involving China Construction Bank Corp. shares. In April, the Hong Kong regulator sought to ban Tiger Asia from trading there, the first time it appealed to a court for such a prohibition.

Hedge funds have come under scrutiny by regulators worldwide after the global financial crisis. New York-based Galleon Group co-founder Raj Rajaratnam was arrested in October 2009 and charged with securities fraud in the biggest insider- trading prosecution in history. A former hedge-fund trader at London-based AKO Capital LLP was charged by the U.K. financial regulator with insider trading in April.

"Since the crisis, we've seen regulators increasing the scope and intensity of investigations and enforcement, and also signs of increased cooperation with overseas regulators, such as the SEC," said James Wadham, a Hong Kong-based litigation partner at Clifford Chance LLP. "This is a trend that we expect to continue across Asia."

Trading Not Affected

Tiger Asia told clients it's cooperating with the SEC. The firm denies any wrongdoing and continues to fight the injunction sought by the Hong Kong regulator, according to the letter. Its trading in Hong Kong isn't affected, the firm wrote.

Shawn Pattison, a spokesman for the hedge fund, declined to comment, as did John Nester, a spokesman for the SEC in Washington.

Hong Kong-based SFC spokesman Jonathan Li declined to say whether the regulator's investigation into Tiger Asia continues. Two legal actions by the SFC against the fund, for a freeze of their assets and to ban them from trading in Hong Kong, are ongoing, Li said. He declined to comment on the extent of the SFC's cooperation with the U.S. regulator.

Tiger Cub

Tiger Asia managed $3 billion in assets as of September 30, down more than $1 billion from a year ago, said an investor with the firm, who declined to be identified because the information is private. The fund lost 7.4% in the third quarter and declined 0.8% this year through September, according to the letter.

Tiger Asia is one of the so-called Tiger cubs, a group of hedge-fund managers that received backing from Julian Robertson. The investor founded Tiger Management LLC in 1980 and built it into one of the world's largest hedge-fund managers in the late 1990s before returning clients' money in 2000.

The firm has returned an average annual gain of 15% since inception in 2001, said a person briefed on the results who asked not to be identified. Its best year was 2006, when it returned 66%, while its worst was 2008, when it lost about 16%. Last year, the fund gained 2%, compared with the 59% return of the Hang Seng Composite Index.

The firm said in the letter that it's making it easier for clients to withdraw their money, allowing quarterly redemptions without a limit starting January 1, 2011.

Hong Kong Allegations

Tiger Asia employs 25 people, all based in New York, including ten analysts focused on Korea, China and Japan, one of the investors said.

The fund's losses in the third quarter resulted from bets against Chinese securities, Tiger Asia told clients, with most of the losses being incurred in September, when the Hang Seng surged about 10%.

Hong Kong's securities regulator in August 2009 applied for a High Court injunction to freeze as much as HK$29.9 million ($3.85 million) in assets of Tiger Asia, Hwang and two other Tiger Asia officers, Raymond Park and William Tomita. That amount is equivalent to the gains they made from trading shares of China Construction Bank just before Bank of America Corp. announced the sale of $2.8 billion worth of shares in the Chinese company, the SFC said.

In April, the regulator sought to ban Tiger Asia from trading securities and derivatives listed in Hong Kong over fresh allegations of insider trading. It also asked the court to freeze as much as HK$8.6 million in additional Tiger Asia assets.

Confidentiality Agreements

"Regulators everywhere are under political pressure to show teeth and a high-ish profile case is helpful," said Peter Douglas, the principal of Singapore-based GFIA Pte, which advises investors seeking to allocate money to hedge funds and runs a wealth management business. "A lot of the blame for the global financial crisis is being pointed at the financial services industry."

In its latest application, the SFC said Tiger Asia received advance notice and was invited to participate in placements of Bank of China Ltd. shares by UBS AG on December 31, 2008, and by Royal Bank of Scotland Group Plc on January 13, 2009.

The hedge-fund manager was given details of the placements under confidentiality agreements and consented not to deal in the shares of Bank of China, the Hong Kong regulator says. It then proceeded to short-sell 104 million Bank of China shares before the UBS placement, grossing HK$8.6 million of profit, the SFC said.

Shorting involves selling borrowed shares in a company in expectation of buying them back at a lower price later.

Chinese Banks

The SFC said Tiger Asia also sold 256 million of the Chinese bank's shares before the RBS placement, losing about HK$10 million on the trade. Both trades represented illegal insider trading, according to the Hong Kong regulator.

The new allegations would be heard by the court in the same proceedings that will consider the regulator's allegations involving Construction Bank shares. A court date had not been set, according to the April 26 statement.

In both applications, the SFC is seeking to unwind the allegedly illegal trades and restore Tiger Asia's counterparties to their previous holdings, the statements said.