Securities and Exchange Commissioner Cynthia A. Glassman is concerned that requiring hedge fund registration might detract from the agency’s ability to inspect mutual funds.

"I wouldn't want to dilute and divert the limited resources we have to devote to the inspection of mutual funds that are the primary investment for Mom and Pop investors," Glassman said during a recent speech at the Eighth Annual Conference on the Practical Implications of SEC Regulation Outside the United States, in London.

"And I wouldn’t want to mislead investors into thinking that SEC exams of hedge funds give them a Good Housekeeping Seal of Approval. So stay tuned on this one."

Speaking of hedge funds, she continued, "I don't doubt that there are aspects of hedge fund activity that would benefit from scrutiny."

However, Glassman said that she is not sure that registration and the "concomitant inspection process" is the right way to proceed in this arena. Hedge funds are typically for high-net-worth investors and institutions that have the ability to do their due diligence, she said, adding that the Commission has its normal enforcement authority if fraud does in fact occur.

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