MSN MoneyCentral – Hedge fund managers whose businesses are deemed high risk by the chief US financial regulator will be inspected every three years, the official who will lead the examinations hasrevealed.
Gene Gohlke, associate director in the regulator’s compliance office, said hedge funds whose businesses were classified as low risk could also be inspected if they were randomly selected from among all investment advisers registered with the Securities and Exchange Commission.
The SEC is requiring many hedge fund managers based in the US and overseas to register by this Wednesday, in an attempt to counter fraud in their industry. Between 700 and 800 hedge funds are expected to do so.
The rule has been criticised because of concerns that the regulator does not have the re-sources to detect fraud at hedge funds. The compliance office did not spot abusive trading practices in mutual funds in 2003, even though it inspected them.
