U.S. regulators are scrutinizing how hedge funds and other money managers divvy up the stock they get from hot initial public offerings due to concerns that highly lucrative trades are inappropriately enriching a select few, said three people familiar with the matter.

Investment firms typically oversee multiple funds, and the Securities and Exchange Commission is asking how they dole out shares of newly listed companies among those various portfolios, the people said. One worry is that stock is being moved to badly performing funds to bolster returns. The SEC's examination comes after it found instances in which firms violated securities laws by directing winning trades to their own employees and favored clients.

Hedge funds often buy into IPOs for a quick profit. The stock is typically priced at what's believed to be a discount to its actual market value to ensure a pop in shares on the first day of trading — an incentive for buyers to take a risk on a new company. On average, newly listed shares gain 16% on the first day of trading, according to Bloomberg data on U.S. IPOs since 2015 that raised more than $50 million.