Regulators’ widespread probe into the $7.6 trillion mutual fund industry is likely to continue throughout 2005 and possibly into the following year through new chapters investigating questionable relationships with brokerage firms, InvestmentNews reports.

Officials at the NASD concede conflicts of interest are inherent in the financial services industry and may never be completely extinguished, but regulators say certain practices need additional attention.

Mary Schapiro, vice chairman of the NASD, said regulators are still seeking additional transparency for investors and will target their efforts at exposing conflicts of interest. For example, the latest wave of investigations centering on improper gifts exchanged between trading experts at Fidelity Investments and brokerage firms that handle orders for the mutual fund giants may soon spread to other mutual fund providers.

Hedge funds have largely succeeded in dodging regulators’ bullets, but increasing investments into alternative investments from large public funds like the California Public Employees’ Retirement System, or CalPERS, may raise increase pressure for added oversight of hedge funds.

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