• by Erik Sass  @eriksass1, October 13, 2010

The good news about subscription growth at satellite broadcaster Sirius XM has been tempered somewhat by the company's disclosure that its marketing practices have come under legal scrutiny from the attorneys general of seven states.

It's not clear whether this preliminary investigation will lead to legal action, but the news was alarming enough to investors to give Sirius XM's stock price a jolt Wednesday morning. (It recovered by the afternoon.)

The attorneys general of Ohio, Arizona, Connecticut, Tennessee, Vermont, and the District of Columbia are cooperating to investigate the satcaster's "practices relating to the cancellation of subscriptions; automatic renewal of subscriptions; charging, billing, collecting, and refunding or crediting of payments from consumers; and soliciting customers," according to a recent SEC filing from Sirius XM.

The attorneys general of Florida and Missouri are conducting separate investigations.

The investigations likely include the company's aggressive use of telemarketing. Missouri has already brought a lawsuit against Sirius XM for calling consumers in violation of that state's "Do Not Call" legislation, including repeated calls to former subscribers who let their subscriptions lapse and consumers who didn't opt for a paid subscription after a free trial period.

Last week, Sirius XM said it expects to see its combined subscriber base grow 6.9% to 20.1 million at the end of this year. CEO Mel Karmazin said the satcaster currently has about 19.5 million subscribers.

Last month, Karmazin expressed optimism that Sirius XM would be able to renew its deal with Howard Stern, the high-profile shock jock brought on board earlier this decade to help recruit subscribers from his loyal fan base.