So what is Emanuel J. Friedman doing?

Speculation about what the former co-chief executive of Friedman, Billings, Ramsey Group Inc. is up to is fodder for plenty of gossip these days within Washington's investment community.

What's known is this: "Manny" Friedman has formed EJF Capital LLC, a company whose address is listed in incorporation documents just a few blocks away from FBR's Rosslyn headquarters. He has hired Neal Wilson, a former managing director of FBR's asset management group who helped Friedman run the firm's hedge funds. And EJF has hired about a dozen people from FBR, mostly from the support staff that had helped Friedman run the wealthy-client money management business when he was at FBR.

Beyond that it gets fuzzy. Three people close to Friedman, all of whom spoke on condition of anonymity, saying Friedman would not be happy they were commenting, said he is raising a hedge fund to invest in financial services and real estate stocks.

And beyond that it's even fuzzier. One source said Friedman has contemplated starting his own boutique investment banking shop.

Friedman did not return several calls. And FBR spokeswoman Lauren Burk said the firm would not comment.

What Friedman can do, legally, is up in the air. The staff of the Securities and Exchange Commission has told him it is considering filing a civil action against him for insider trading as part of FBR's role in a private stock placement in 2001. FBR has already offered to settle with the SEC for $7.5 million for the firm's role in the deal, which resulted in the resignations of Freidman and the firm's trading chief and senior compliance officer. If Friedman is subject to an enforcement action, the NASD could deny Friedman a license to broker securities.

-- Terence O'Hara