A federal probe of possible market manipulation and insider trading by a hedge fund manager was derailed when Securities and Exchange Commission officials found that an agency supervisor had improper contact with the fund manager, according to a report released Wednesday by the SEC’s inspector general.

The report did not identify the employee, who worked at the agency’s headquarters, or the hedge fund manager, and it described the case in elliptical terms.

The supervisory attorney allegedly talked to the hedge fund manager about whether it was legal for the manager to purchase certain securities before attempting a company takeover, inspector general H. David Kotz wrote in the semiannual report to Congress.

Other SEC officials concluded that those contacts made it impossible for the agency to pursue a case against the hedge fund manager because he could raise them as a defense, the report said.

In mid-2010, acting on a tip from SEC examiners, the agency opened an investigation of suspected violations by the hedge fund manager dating back to 2006. The agency focused on the manager’s purchase of securities in an unnamed “natural resource company” and his subsequent offer to buy all of the company’s remaining shares.

The SEC supervisory attorney allegedly told the hedge fund manager that it was legal for him to buy the securities before announcing the takeover offer, the report said. In an e-mail, the SEC supervisor gave the hedge fund manager his cellphone number and said “that he might ‘feel freer’ to fully express his opinions on a non-SEC line,” the inspector general said.

The e-mail “created a cloud of suspicion as to the SEC attorney’s intentions,” the inspector general said, and he recommended that the attorney be disciplined “up to and including dismissal,” the report said. The inspector general wrote that communications between the SEC attorney and the hedge fund manager went back years, “indicating a close relationship.”

When the inspector general’s investigation was completed, the agency was closing its probe of the hedge fund manager, the report said.

The report also illustrated how the revolving door between the SEC and the businesses it oversees can complicate the agency’s work.

In a separate case, the inspector general investigated an anonymous tip that staff members in an SEC regional office uncovered a massive fraud by a hedge fund manager but that the agency failed to pursue the matter. The unnamed hedge fund manager was considered one of the contributors to the financial crisis of 2008, according to the tip.

The inspector general found that, in 2004, examiners in the regional office scrutinized the hedge fund manager and his brokerage firm and recommended that the SEC’s regional enforcement staff investigate the manager for possible fraud. The enforcement staff decided to investigate, the report said.

However, a senior official in that regional office had recently left the SEC for a job with the brokerage firm, saddling the SEC with a potential conflict of interest, according to the report. To avoid that problem, the office that had been working on the case transferred it to another SEC regional office, the report said.

The inspector general said that the second regional office narrowed the scope of the probe “solely to simplify the matter” and that office “did not fully understand” the other issues in the case. Without taking testimony from the hedge fund manager or any other witnesses, the second regional office later closed the matter entirely, citing the “lack of a good working theory,” the report said.

Although the investigation was closed “after a limited amount of investigatory work,” the inspector general said, “we did not find evidence to substantiate the allegation that the SEC failed to investigate the alleged violations.”

The first regional office declined a chance to take back the case, but it opened a second probe of the hedge fund manager in 2007, the report said. That probe was closed with no enforcement action.

The report also described other improprieties by unidentified SEC employees.

For example, the inspector general’s office found that in May a senior officer in a regional office had used about two weeks of sick leave to vacation in Hawaii. In June, the same employee submitted an advance request to use more sick leave six weeks later.

That request was rejected when a supervisor questioned why the officer was requesting sick leave so far in advance, the report said.

The employee resigned before she could be disciplined, but the sick leave was deducted from her accrued vacation time.

Another employee spent much of her time on the job, include hours for which she was paid overtime, working on a private for-profit travel business, the report said. The employee admitted to signing up her supervisor and two other SEC employees to start similar businesses, the report said. The supervisor then used SEC facilities for her private travel business, the report said.

The inspector general recommended disciplinary action and referred the falsification of overtime to the Justice Department, which declined to prosecute, the report said.