Lawyers for hedge funds run by Steven Cohen & James Chanos have been notified by the SEC that they are terminating an investigation that looked into whether the  funds conspired to spread negative information about Toronto insurer Fairfax Financial, two people familiar with the inquiry said.  The sources, who didn't want to be identified because the SEC hasn't made the letters public, said the termination letters were sent out a little over a month ago. The probe which began in 2008, springs from a civil lawsuit Fairfax filed in 2006 in New Jersey state court, alleging Cohen's SAC Capital, Chano's Kynikos Associates and other traders took part in a so-called short conspiracy. The lawsuit, which is still ongoing, alleges the hedge funds bet against Fairfax shares and then spread negative stories about the company in hopes of driving down the stock price.  In early 2009, the SEC stepped up its investigation when it sent a subpoena to Fairfax's lawyers seeking copies of all emails and trading reports the hedge funds had turned over in the course of the civil litigation. For Cohen, the SEC decision to end its investigation is a second legal win in the Fairfax fracas. In September, New Jersey Superior Court judge Stephan Hansbury dismissed Fairfax's claims that SAC Capital had participated in a short conspiracy.  The judge has yet to rule on motions to dismiss filed by Kynikos and other defendants. A spokesman for Cohen's $16 billion fund SAC Capital Advisors declined to comment. A lawyer for Chanos' $6 billion Kynikos Associates declined to comment as well. An SEC spokesman declined to comment. Last year, Fairfax's lawyer began taking depositions in the civil suit, including lengthy depositions of Chanos and Cohen. To date, only portions of those depositions have been made public.Fairfax, speaking through its lawyers, declined to comment on the SEC action. [Reuters 12/8/11]