NovaStar Financial, Kansas City, Mo., said the Securities and Exchange Commission notified it last Friday that it is conducting an informal inquiry into certain business practices.NovaStar's outside counsel Lanny Davis said in a statement issued by the company "receiving this notice was not surprising in the aftermath of a widely circulated newspaper story. As the SEC stated in its letter, this inquiry 'should not be construed as an indication by the Commission or its staff that any violations of law have occurred.' NovaStar is confident that a full review of the facts should put this matter behind it." The announcement was made after the market closed on April 19. NovaStar's stock, which had already begun a substantial decline on April 12, was down by $5.50 per share to $33.51 at 11:15 a.m. on April 20.

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