Hedge fund mogul William Ackman and his Pershing Square Capital Management are facing an insider trading probe by the U.S. Securities & Exchange Commission over the hostile takeover bid for Allergan (NYSE:AGN) by Pershing Square and Valeant Pharmaceuticals, according to news reports.

Ackman and Valeant have been pressing for months for a proxy vote to oust Allergan’s board and replace it with a roster of their own candidates who would approve the $43.7 billion merger. Allergan has alleged in a lawsuit that its unwanted suitors broke insider trading laws in pursuing the union.

The battle isn’t keeping either Allergan or Ackman from getting on with business. Allergan today announced a deal for Taris Biomedical’s Phase II bladder drug, Liris, that’s worth up to $588 million. And Bloomberg reported that Ackman, undaunted by the SEC investigation, dangled the possibility of an IPO for Pershing Square.

The Wall Street Journal, citing "people familiar with the matter," said today that the SEC’s civil probe "is focused on potential breaches of insider trading laws."

"The inquiry is at a relatively early stage and may not lead to any enforcement action," according to the newspaper. "Regulators often look closely at novel or unusual developments in the market, and many investigations go nowhere."

"We are confident that the trading was completely lawful," Valeant told the Journal in a prepared statement today.

The SEC investigation isn’t the only government scrutiny facing the hostile takeover. Earlier this week, the Federal Trade Commission made a 2nd request for information about Valeant’s offer.