The SEC will beging to step up its examination of insider trading at hedge funds. According to Bloomberg "SEC officials told hedge funds to list clients and workers who serve as officers or directors of publicly traded companies, along with the names of any relatives who hold such posts, according to a 27-page letter to industry executives."
Hedge funds often have early information on buy-outs and often are involved in financing them. A number of funds also invest in public company private financing deals where a company sells stock to a fund with the shares being registered at a future date. There has been concerns that funds may short shares in these companies before those shares can be freely traded.
SEC inspectors conducted about 2,400 reviews of investment advisers and brokers during the fiscal year ended September 2006, according to the agency’s annual report. And, it would appear that the number is going to rise.
Douglas A. McIntyre
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