SEC Conducting ‘Dozens’ Of Hedge Fund Probes

Mar 23 2009 | 1:57pm ET

The Securities and Exchange Commission is working on “dozens” of investigations involving hedge funds, one of its members told a Congressional committee on Friday.

SEC Commissioner Elisse Walter told the House Financial Services Committee that the agency, which was battered over its failure to detect the multi-billion dollar Ponzi scheme orchestrated by Bernard Madoff, is looking into both potential fraud cases as well as possible preferential treatment in redemption policy.

“The SEC has become particularly concerned about possible hedge fund-offering frauds, where fraudsters use the nontransparent and largely unregulated status of hedge funds to conceal large Ponzi schemes,” she said in written testimony.

But the regulator isn’t concerned only with such spectacular frauds: Walter said the SEC is worried that hedge fund firms that have suspended redemptions or are liquidating have been favoring their own interests over those of their clients. The avalanche of withdrawal restrictions and hedge fund closures over the past year has exacerbated the SEC’s concern.

“The huge number of liquidations and suspensions of redemptions by hedge funds in the past year have created particular concern as to whether hedge fund advisers may be favoring their own interests above others,” Walter said, adding that the SEC is probing “whether principals, employees or favored investors of the hedge fund adviser may have received ‘preferential redemptions’ from the fund at issue.”

Walter also said the SEC is looking into misconduct at so-called “feeder funds,” such as those that provided Madoff with the bulk of the assets for his Ponzi scheme.


In Depth

Humble in Hofstra...One Debate an Election Can Make

Sep 26 2016 | 10:20am ET

Tonight's U.S. Presidential debate, infamously coined the “Humbling in Hofstra...

Lifestyle

Vortic: Reimagining the Custom Wristwatch

Sep 27 2016 | 7:24pm ET

American watch manufacturer Vortic, which started out restoring antique pocket watch...

Guest Contributor

Hedge Fund Marketing – Tips for Your Initial Sales Meeting

Sep 29 2016 | 5:46pm ET

There are two main goals a hedge fund should have for an initial in-person sales...