Activist investor Bill Ackman and his quest to bring Valeant Pharmaceuticals Intl Inc (NYSE:VRX) together with Allergan, Inc. (NYSE:AGN) has been well-publicized, but has he broken any laws? That’s what the Securities and Exchange Commission apparently wants to know. Regulators are looking possible breaches of insider trading laws, reports The Wall Street Journal, which cites unnamed sources.

Bill Ackman Pershing Square Allergan

SEC probes Ackman on insider trading

The sources reportedly said the civil investigation is currently at a rather early stage and might not result in any action against Bill Ackman or his firm, Pershing Square Capital Management. Of course it isn’t uncommon for regulators to examine unusual developments, but often their investigators do not turn up anything substantial.

Earlier this year, Ackman’s firm purchased a 9.7% stake in Allergan “with the understanding that Valeant would seek to buy the company,” reports The Wall Street Journal. It’s certainly unusual for an activist investor to team up with a company that plans to make a buyout bid for another company, but both Valeant and Ackman have said their partnership has remained within the boundaries of the law.

Is the Ackman – Valeant partnership legal?

Valeant issued a statement today saying that it is “confident that the trading was completely lawful.” The drug maker made a bid for Allergan earlier this year, but Allergan rejected all three of the offers that have been made. Then in June, Valeant and Pershing Square began the process of making a hostile tender offer by bring the issue before shareholders. They are now trying to call a special meeting of the Botox maker’s shareholders and also replace most of its board members.

Although the partnership between Ackman’s firm and Valeant is unusual, experts say it looks to be legal. The two parties signed an agreement for Valeant to make a “friendly” offer for Allergan in February. They have both said that they had not made any “substantial steps” toward making a hostile bid at the time the trades in Allergan shares were made. According to federal law, investors cannot buy shares of a company they know will receive a tender offer from another company.

Allergan has filed suit against both Pershing Square and Valeant, alleging that they violated insider trading and other federal securities laws. The Botox maker claims that both parties knew back in February—before they officially made their first official bid in April—that they would have to make a hostile bid in order to complete a deal.