The Securities and Exchange Commission issued a 134-page report Monday recommending that hedge funds register as investment advisors with the SEC. The SEC said that while it has historically allowed hedge funds to exist without registering, regulators are now concerned that the recent rapid growth of hedge funds, particularly among institutional investors, and increasing cases of fraud, now warrant oversight. The most recent high-profile case of fraud is the investigation into market timing and late trading by Canary Capital Partners.

The SEC called hedge funds – which currently have $600 billion of assets and are expected to reach $1 trillion within 10 years – "increasingly influential participants in the U.S. financial markets."

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