Guggenheim Partners confirmed that the Securities and Exchange Commission has been examining its dealings with Milken for two years.
Milken, known as the king of high-risk "junk" bonds in the 1980s, pleaded guilty to securities-law violations in 1990 and served 22 months in prison. He agreed in a settlement with the SEC to a lifetime ban from the securities industry.
Fortune magazine reported online earlier Wednesday that the SEC is investigating whether Milken has violated the ban by managing investments under Guggenheim's control other than his own.
New York-based Guggenheim said in a statement that it is cooperating with the SEC's inquiry. While Milken is a valued client of the firm, the statement says, he "does not have an ownership or managerial role in the firm in any way, shape or form."
SEC spokeswoman Christina D'Amico declined to comment.
Representatives for Milken said in a statement that he sometimes discusses his and his family's personal investments with advisers and money managers. However, the statement said, Milken "has had no desire to be in the securities business in any capacity and has strictly avoided doing anything that could be interpreted otherwise."
"For the past 20 years, Michael Milken has devoted the overwhelming majority of his time to philanthropic initiatives, especially in education and as an advocate for medical research on a wide range of life-threatening diseases," the statement says.
Milken, who is a prostate cancer survivor, and his family have given hundreds of millions of dollars away in recent decades. Much of it is channeled through the Milken Family Foundation, founded in 1982, which funds education and medical research, especially in the area of cancer.
The "junk" bonds that Milken pioneered were used to finance corporate takeover battles, and he became a dominant force in the 1980s takeover boom.
In 1995, the SEC began investigating Milken again, soon after it became public that he had received a $50 million fee for helping to broker Time Warner's purchase of Turner Broadcasting.
The agency sued Milken in 1998, alleging that he violated his pledge not to re-enter the securities business. Without admitting or denying the allegations, Milken agreed to repay $47 million in brokerage fees.
Guggenheim, along with basketball great Magic Johnson, is among the owners of the Los Angeles Dodgers. They bought the Major League baseball team out of bankruptcy last year for $2 billion from Frank McCourt.