Shares of Bristol-Myers Squib have tanked in recent days thanks to a barrage of bad news including a federal probe into the recent settlement of a patent dispute and increased competition from a generic version of its popular Plavix blood thinner.

But now regulators are examining whether some investors may have improperly benefited from the company's recent misfortunes, CNBC has learned.

            At issue: A huge run up in "short interest" in the company's stock just prior to all the negative publicity that caused shares of Bristol-Myers to slide more than 19% in recent weeks.

Short interest is the amount of stock that is sold short, which allows investors to make money when stock craters. Following a complaint by the company, officials at the NYSE are now examining whether some investors may have had advanced warning of the company's problems when they made their bet, according to people with knowledge of the NYSE's activities.

            One thing is certain: The run-up in short interest in the stock is significant. Company officials confirm that short interest equaled 27 million shares on June 15, the last reporting date. By July 15, short interest more than doubled at 47 million shares. The next reporting date is Aug. 15 so the number might be larger, at the moment though, short interest amounts to a whopping 10% of the 2 billion shares outstanding in the company's stock.

More interesting is the timing of the ramp up. Bristol-Meyers recent misfortunes began circulating in the media in late July when the FBI raided its offices in a Justice Department probe of its patent deal with a generic drug maker over Plavix. That began a barrage of negative news for the company including announcements of declining profits, and most recently, an announcement by Apotex that it will indeed release a generic drug to compete with Plavix.

            In recent months, regulators have increased oversight of the once lightly regulated market for short selling. The NYSE, for instance, has launched a probe of Vonage's IPO, which sank from $17 a share to around $7 and whether short sellers improperly benefited. Allegedly improper short selling has attracted congressional scrutiny and the SEC has recently tightened rules on so call naked short selling.

            It's unclear whether the NYSE interest in the Bristol-Myers issue will lead to charges but one thing is certain, company officials believe someone had advanced knowledge of the problems based on the huge increase in short selling they've discovered just prior to the recent announcements.

When the Securities and Exchange Commission closes a case without bringing charges, targets usually get a private, form letter from the agency alerting them that they've been cleared and the case is closed. But that all might change for two high-profile targets of the commission, Pequot Capital and Morgan Stanley CEO John Mack.

CNBC has learned that the commission is considering the unusual, and some would say, unprecedented move of not just officially alerting Pequot and Mack that they are cleared of possible insider trading charges, but also releasing all the evidence in the probe.

The move comes after a former SEC attorney Gary Aguirre went public with charges that he was fired from the SEC when he sought Mack's testimony in an insider trading case against Pequot. Aguirre said he had reason to believe that Mack gave Pequot an insider tip on a pending merger that allowed Pequot, a massive hedge fund run by Mack's good friend Arthur Samberg, make millions of dollars in profits. Both Mack and Pequot have denied the charges.

But people close to the case say the commission's investigation into Pequot and Mack is reaching its final stages. CNBC was first to report this morning that Mack gave his deposition in the case on Tuesday, and the entire matter could be concluded in the coming weeks. Though the investigation is still open, these people say the evidence that Mack offered an insider tip to Pequot is sketchy at best, leading some people at the commission to believe there is not enough evidence to bring charges against the Morgan Stanley CEO.

Of course anything is possible. It's unclear what Mack said during his deposition yesterday before the SEC. It is of course completely possible that Mack provided new details that may cause the SEC's enforcement staff to believe that Mack may have provided a tip to Samberg, which could result in the investigation continuing or at some point, formal charges being filed against Mack, Pequot or both.

But if that is not the case, the SEC enforcement staff is planning to ask the full commission to give the green light to release all the evidence in the case, which includes emails and other documents developed by Aguirre. There are two reasons why the SEC enforcement staff is pushing for a complete disclosure of the evidence. First, the enforcement staff wants to clear its own name from charges that it pulled punches to protect a high-ranking CEO with close political ties to the Bush administration, these people say (Mack, notably, had contributed to the president’s campaign). But also, some people in the commission believe that if there isn't enough evidence to charge Mack, he deserves to have his name cleared. These people say he was unfairly attacked when Aguirre went public before the Senate Judiciary Committee saying he had evidence that Mack gave an insider tip to Pequot but never once showed his cards. Aguirre has said that the SEC warned him not to disclose information from his work at the commission.

Charles Gasparino - CNBC