The Securities and Exchange Commission is investigating whether Wellington Management Co. LLP, a large Boston-based institutional money manager, favored some clients over others when it handed out hot new stocks and shares bought in bulk trades, sources familiar with the probe said yesterday.

Wellington provides management services to pension funds, endowments, hedge funds and 250 mutual funds worldwide, including a dozen of the Vanguard Group's best known funds. Wellington spokeswoman Lisa D. Finkel said in a written statement: "We were informed by the SEC several months ago that it had initiated an investigation related to our trading practices and procedures."

The investigation is part of a broader look by the SEC at the issue of conflicts of interest in the way money managers allocate desirable stocks among their clients, said the sources, who spoke on the condition of anonymity because the investigation is continuing. SEC Compliance Director Lori A. Richards outlined the commission's concerns in a March report to Capitol Hill. In it she said the SEC staff was trying to determine whether there were "preferential allocations among accounts (e.g. to favored accounts such as those paying higher fees)."

The commission's staff is particularly concerned that firms that manage both hedge funds and mutual funds may be giving outsized allocations of hot stocks to the hedge funds because they earn higher fees from hedge funds than from mutual funds. Regulators are also looking at whether some management firms are allowing their own portfolio managers to "cherry pick" the best stocks at the best prices for their high-fee clients, while giving the dregs to the mutual funds. Some firms may also be allowing hedge fund managers to engage in a form of front-running -- by allowing them to buy a particular stock right before the in-house mutual fund buys a large block of the same security and pushes up the price, the sources said.

It could not be determined yesterday what other management firms are under scrutiny or which specific practices are the focus of the Wellington probe. The fact that Wellington is under investigation was reported Wednesday by the New York Times.

Wellington's Finkel said the firm does not believe the investigation is related to the kind of improper short-term trading that has led more than a dozen mutual fund companies to pay more than $2.3 billion in settlements since last fall.

"We have high conviction that the procedures, controls and oversight we have in place ensure that our business is conducted fairly, appropriately and in the best interest of all of our clients," she said, adding that the firm, which has $415 billion in assets under management, had kept its clients fully informed about the investigation.

Vanguard officials agreed in a written statement that they had been kept up to date. They said: "We understand that the investigation was instituted as part of a routine examination. To date, we are not aware of any specific link between the inquiry and Wellington's management of Vanguard funds. Vanguard has a long-standing relationship with Wellington and remains confident in their abilities as an adviser of our clients' assets."