A third letter from the SEC actually confirms that Herbalife is linked in some way to a regulatory investigation

Herbalife is apparently still under investigation by the Securities and Exchange Commission, and the evidence seems to be getting more and more concrete. The folks at Probes Reporter provided an update to their ongoing investigation of Herbalife today.

Herbalife Ltd. HLF

SEC activity against Herbalife

In a post today, they said they received another letter from the SEC. The latest one is dated Feb. 12 and follows two other letters dated May 12 and Dec. 22. The first two letters suggested that Herbalife may have had an undisclosed SEC investigation underway, and Probes Reporter states that this third letter confirms the “company’s involvement in on-going enforcement proceedings.”

Probes Reporter sends requests for information about various companies under the Freedom of Information Act. However, those requests for information are denied when the company in question is under investigation. Regulators cite a pending “law enforcement proceeding.”

SEC probe of Herbalife confirmed

“We have confirmed with staff that the responsive matter remains open and that releasing the withheld information could reasonably be expected to interfere with the on-going enforcement proceedings,” the SEC’s latest letter to Probes Reporter reads.

In other words, the SEC is basically saying that there is indeed something going on with Herbalife, although of course we have no idea exactly how the controversial company is related to the investigation. It could be at the center of an SEC probe, or it might simply be related to a pending case in some way.

Herbalife’s disclosure practices blasted

In the last update earlier this month, Probes Reporter blasted Herbalife’s disclosure practices, pointing to what it called a “stealth disclosure of an SEC probe” dating all the way back to a regulatory filing in February 2013. At that time, Herbalife said it had requested a meeting with the SEC and that there were some requests for documents, but the company has provided no update since then.

The debate about whether Herbalife is a pyramid scheme has been going on for more than two years now. Activist investor Bill Ackman, who first raised the allegations, has been rather mum on Herbalife in these last few weeks. That’s actually a rather good thing, as it’s starting to sound like a broken record. But if Herbalife is at the center of an investigation that’s been going on for two years now, that is certainly problematic for the company and will be good news for Ackman’s camp.

Some Herbalife investors bail

This month George Soros upped his long position in Herbalife, and Wall Street reacted with excitement. However, Soros may be in the minority among major investors in terms of being on the long side. Three of Herbalife’s top 20 investors dumped their stakes during the fourth quarter.

Now as another sign points to trouble at Herbalife, it will be interesting to see whether any more of the company’s biggest investors start to exit their positions during the current quarter.

As of this writing, shares of Herbalife were down by 2.49% to $33.25 per share.