Warning: Hedge fund advisers may be in for a rough ride if the Securities and Exchange Commission comes a-knocking. Since the new hedge fund registration rules when into effect, the Financial Times reports, firms are finding the SEC inspectors are a lot tougher than expected. One attorney who represents hedge funds, Jedd Wider of Morgan Lewis in New York, said that already more than 10 of his clients have been scrutinized. Wider said, “A number of inspections by the SEC have been extremely thorough, which leads one to believe that the SEC is clearly taking its role, especially post-registration, extremely seriously.” And how. One HF broker-dealer in Connecticut, who was not identified, says inspectors didn’t stop with his firm but also asked if he knew of advisers that hadn’t registered yet or if there any problems that need to be addressed. SEC spokesman John Heiner told the FT that there is nothing unusual about the agency’s alacrity in this matter: “Our risk-based examinations are progressing apace.” But an unnamed Connecticut HF broker warned in an FT interview: “Hedge funds better keep good books and records, and don’t even think about cutting any corners.”
