Sept. 27 (Bloomberg) -- The U.S. Securities and Exchange Commission ratcheted up its probe of Senate Majority Leader Bill First's sale of HCA Inc. shares, granting agency staff more legal power to obtain evidence, people with direct knowledge of the inquiry said.

The SEC authorized a formal order of investigation, which allows the agency's enforcement unit to subpoena documents and compel witnesses to testify, said the people, who asked not to be identified because the order hasn't been made public. A formal order requires the approval of at least one of the SEC's five commissioners.

While the formal probe raises the legal stakes for Frist, a Tennessee Republican, it doesn't indicate that the SEC's investigators have uncovered any evidence of illegal insider trading, said Michael Missal, a former enforcement lawyer at the agency.

``Given the notoriety of this matter, presumably the SEC staff wants to make absolutely sure it can get information quickly from sources other than Senator Frist, who has already said he's cooperating,'' said Missal, now a partner at Kirkpatrick & Lockhart Nicholson Graham in Washington.

Amy Call, a spokeswoman for Frist, couldn't immediately be reached for comment after business hours today. Frist yesterday said he acted properly. John Nester, an SEC spokesman, declined to comment.

Christopher Cox, the agency's chairman and a former Republican lawmaker, said yesterday he would recuse himself from the case to avoid the ``appearance of impropriety.''

Earnings Notice

Frist, 53, directed the trustees of his blind trust to sell his shares on June 13, one month before the company said its second-quarter earnings would fail to meet analysts' estimates. The trustees notified Frist on July 1 that the shares had been sold. When HCA issued its earnings notice on July 13, the stock fell $4.86 to $50.05, the biggest decline in more than two years. During the two-week period when Frist's sale occurred, the shares averaged $57.21, reaching a 52-week high of $58.60 on June 22.

Nashville, Tennessee-based HCA, the biggest U.S. hospital chain, was founded by Frist's father and brother, who serves as a director on the company's board.

The Department of Justice is also investigating the matter. HCA said Sept. 23 that it received a subpoena from the U.S. attorney in Manhattan, and Frist said he will cooperate with the prosecutor's office. HCA also said it ``intends to cooperate fully.''

In his first public comments yesterday, Frist insisted he did not have non-public information before making the decision to sell. He also alluded to a possible presidential bid, saying he wanted to put an end to persistent questions about his HCA holdings as he prepared for his ``final years in the Senate and what might come next.''

`Acted Properly'

``An examination of the facts will demonstrate I acted properly,'' Frist told reporters in Washington. ``I had no information about HCA or its performance that was not publicly available when I directed the trustees to sell the stock.''

Frist said he wanted to divest his shares to remove any possibility of a conflict of interest on health-care policy, and in April asked his staff to consult with outside counsel and Senate ethics committee staff to ensure the rules permitted him to direct the sale. He said they found the sale was allowed.

Two government ethics groups -- Citizens for Responsibility and Ethics in Washington and Common Cause -- have called on the Senate ethics committee to look into the sales and Frist's communications with the trustee managing his Senate-approved blind trust, which held the shares.

To contact the reporter on this story: Otis Bilodeau in Washington at obilodeau@bloomberg.net.

Last Updated: September 27, 2005 20:30 EDT