MSN MoneyCentral – The Securities and Exchange Commission will be monitoring hedge funds through their dealings with broker dealers, and those relationships will come under more scrutiny, thecommission’s director of enforcement said Wednesday.
Linda Chatman Thomsen, speaking in New York, said the SEC would be paying attention to whether broker-dealers were ignoring red flags that were readily apparent in their dealings with hedge funds.
“What we’re seeing in cases is beyond a blind eye and into aiding and abetting,” Thomsen said at a seminar sponsored by the Practising Law Institute. “Activities with hedge funds are going to be something we’re going to focus on.”
Hedge funds are among the most active traders of stocks, bonds and derivatives. But the SEC lost its already limited ability to directly oversee them in June, when a federal court rejected a controversial rule requiring hedge-fund managers to register with the SEC.
Broker-dealers like Goldman Sachs Group Inc. and Morgan Stanley, which do lots of business with hedge funds and whose activities are regulated by the SEC, may give the commission an indirect look at what funds are up to.
