New York (HedgeCo.net) – Axiom Valuation has released a new platform for hedge funds to avoid the SEC’s new screening tool, Aberrational Performance Inquiry (API), which identifies possible fraudulent valuations and misreported returns by hedge fund managers reporting above benchmark returns.

“For a hedge fund seeking to avoid being subject to the SEC’s API process, Axiom Valuation’s AIRAS capability can protect the fund from a possible SEC API by demonstrating through a quantitatively robust and empirically defensible report that the fund’s self-reported returns match the fund’s strategies.” The company said.

Last week’s SEC announcement of enforcement actions against three hedge funds and six individuals for misconduct including improper use of fund assets, fraudulent valuations, and misrepresenting fund returns, demonstrated a ground-breaking shift in the operating environment for hedge funds.

These are the first actions brought by the SEC using their new API capability, which utilizes proprietary risk analytics to test hedge fund’s self-reported returns against the fund’s investment strategy or other benchmarks.  For the first time, the SEC has an analytical and information advantage over the hedge funds it regulates.

The SEC is casting a wide net across all hedge funds that are reporting performance of greater than 3% above market indexes, according to testimony by Robert Khuzami, Director of the Division of Enforcement for the SEC in March, 2011.  This means that most successful hedge funds will be targeted for at least some degree of further scrutiny by the SEC’s API process.  This scrutiny cannot be good news for hedge funds in terms of management time, legal costs, and reputational risk.  In essence, these successful hedge funds are guilty until proven innocent.

New York (HedgeCo.net) – A free Twitter watcher, WallStreetBirds.com, has been launched by Scottsdale, AZ based Modulus Informatics, Inc., allowing the general public to make investment decisions based on the real-time analysis of twitter data.

“Wall Street Birds is a free service that anyone can use. Simply go to the site, register, type in a company name and instantly receive stock signals based on real-time Twitter analysis. Users are made completely unaware of the mathematical and technical complexities behind the scenes, which was our goal,” said Richard Gardner, founder of Wall Street Birds and CEO of parent company, Modulus Informatics, Inc.

A programming API is also provided for financial institutions desiring a fast track to managing funds using social media. The API can be used for developing high frequency trading systems based on the instantaneous analysis of social media data by Wall Street Birds.

Scientists from Indiana University and the University of Manchester recently published findings proving that social media has an 86.7% accuracy rate at predicting the stock market. Those findings spawned a variety of social media hedge fund startups.

Alex Akesson