Securities and Exchange Commission Chairman Christopher Cox told the Senate banking committee that oversight of the hedge fund industry is "inadequate" but said legislation is the "prerogative" of Congress, the Associated Press reports.

He also characterized hedge funds as "generally risky ventures that simply don't make sense for most retail investors."

"The Commission stated, when we adopted the hedge fund rule in 2004, that its then current program of hedge fund regulation was inadequate," Cox continued. "With the rejection of the hedge fund rule by the Court of Appeals, I believe that is once again the case."

The committee is holding hearings trying to uncover whether executives at hedge fund Pequot Capital Management engaged in insider trading. One of the people it plans to call in to testify is Morgan Stanley CEO John Mack, who had a brief stint at Pequot's chairman before becoming Morgan's CEO in June 2005.

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