[ by Melanie Gretchen ]

Former SEC officials warn that the Commission is closely watching hedge funds, that in the past year have been newly obligated to disclose assets under management, client types, and plans for making money - i.e., investment strategies. 

So, hedge funds, are you ready for scrutiny by examiners who bring along fat books of new and tougher rules?

Game Changer.   Among the new rules, hedge funds must register with the SEC - as mandated by Dodd-Frank.  Regardless of one's beliefs that the government's ongoing insider trading probe constitutes a "witch hunt" - the SEC isn't going to let up anytime soon.

"The SEC is starting to make surprise visits, they want to make their presence felt." -- Deborah Prutzman, CEO of Regulatory Fundamentals Group, which guides managers on facing these exams.

Hedge funds have reason to worry:

• prosecutors and federal agents' knocking on doors has led to arrests
• prominent funds, like Steven Cohen's SAC Capital Advisors, have been investigated to see whether these funds rely on illegally obtained information to gain an edge
• some 40% of the SEC's current cases revolve around insider trading.

"Hedge fund managers need to understand that they need to stay ahead of the information that the SEC already has on them," including having data available on how funds traded around releases of key corporate releases and having a handle on how their analysts used expert networks. -- David Thelander, a former SEC enforcement lawyer who is now a managing director at regulatory advisory consulting group Promontory.

For further details, go to [Reuters, 1/23/13].