SEC Expected to Expand Hedge Fund Scrutiny

At a conference organized by the New York State Society of Public Accountants, Richard Marshall, a lawyer at Kirkpatrick & Lockhart Nicholson Graham LLP, spoke about hedge fund fraud cases in the U.S. and the fact that $1 of every $1,000 in hedge fund assets was subject to fraud in the past year, HedgeWorld News reports.

"A Columbia drug dealer keeps your money more secure," Marshall said.

Marshall commented that some managers may be susceptible to such illegal activity as insider trading or bending the rules on short selling because hedge funds are currently under pressure of poor returns.

Marshall predicted the SEC would be coming up with even more hedge fund regulations in the future, such as ways to eliminate survival bias due to managers who close failing funds and open new ones in order to sweep poor performance history under the rug.