Scrambling to bolster profits, Wall Street banks have added a new service for their biggest hedge clients - they're serving as full-time headhunters.  That role has regulators concerned because it's rife with potential conflicts. Extra benefits are nothing new on Wall Street and beyond.  For as long as there have been hedge funds, big banks have provided office space and raised money for new portfolios, among other things.  And now they're taking the initiative of passing along résumés or introducing clients to industry professionals - informal, full time recruiters, scouting out finance executives, accountants, receptionists and others for free, which add up to some significant savings. Yes, introductions are nothing new.  However, those once-ancillary placement services have become established practices.  Once again, a time-honored axiom rings true - "necessity is the mother of invention" - and making a hard-earned buck these days on Wall Street requires going that extra yard.  It may not make up for all the profit that's been lost to new regulations and a weak economy, but it has helped. Undisclosed Potential Conflicts of Interest. It's likely that, in most cases, these staffing services are not (adequately) disclosed and don't come with appropriate restrictions.  And few things rile regulators as much as "undisclosed potential conflicts of interest."  This area also appeals to regulators because it's relatively easy to detect - sort of like "low hanging fruit." COI could manifest itself in situations where Wall Street firms risk upsetting a client if they poach hedge fund talent or compete for the same potential employees.  There are questions of loyalty and the absence of arms-length transactions.  A fund manager who was placed with a hedge fund group may be more inclined to direct business to the Wall Street firm that placed them - even if another firm or bank may provide better or cheaper service.  Beyond that one manager, an entire hedge fund company may feel a similar sense of obligation to the Wall Street firm - sort of like "soft dollar" arrangements.  Such dealings often come at the expense of investors, who are unaware of the relationship.   Compliance Insights covers this topic in related stories.    For further details, go to:    [Dealbook, 10/10/11]