Investors are questioning a $4.1 billion takeover of Brighthouse Financial due to parallels with turmoil in Mark Walter's financial empire, shaking Wall Street's confidence in a lucrative trade.

A federal investigation into how Walter used life insurers he owned to finance other businesses has heightened scrutiny of fund managers acquiring insurance companies to invest policyholder funds.

Brighthouse's share price has dropped about 20% since late July when the Walter investigation was reported, reflecting investor skepticism that the deal will proceed. "In one sense, [Walter] is an isolated case but in another it brings attention to how insurance companies have been investing much more in private securities," said Peter Troasi, an analyst at Barclays.

The Delaware insurance regulator issued a statement about its review after receiving numerous questions about the Brighthouse deal. Delaware insurance commissioner Trinidad Navarro stated, "Protecting policyholders remains paramount in every decision, every exam, and every effort of my department." Aquarian Holdings, led by Rudy Sahay, emphasized it has no business relationship with Walter's companies and prioritizes fulfilling commitments to policyholders.