SEC shines spotlight on 150 hedge funds

SEC shines spotlight on 150 hedge funds
America's lead financial regulator is investigating as many as 150 hedge funds as it cracks down on fraud at the height of the recession.

By James Quinn, Wall Street Correspondent, Telegraph
Last Updated: 7:14PM BST 28 Apr 2009

The Securities and Exchange Commission (SEC) chairwoman Mary Schapiro said the watchdog also has 24 active investigations into municipal securities frauds and is looking into 50 cases involving derivatives misuse.

Ms Schapiro revealed the investigations to show how the regulator is getting tough on financial wrongdoing. Although no names were given, the hedge funds under investigation are being looked at for possible "Ponzi" schemes, as well as misappropriation of investors' funds and performance "smoothing" to deceive investors.

The investigations are being led by the SEC's beefed-up enforcement arm, which is being run by Bob Khuzami, who Ms Schapiro appointed in February after the agency's failure to uncover the $65bn Bernard Madoff Ponzi fraud.

One of the SEC's highest profile cases involves Californian fund manager Danny Pang, who earlier this week was charged following allegations he had defrauded investors out of hundreds of millions of dollars since 2003.

Mr Pang, who ran an investment firm called Private Equity Management, is alleged to have lied to clients about the value of investments he was making on their behalf.

Mr Pang told investors he had been a vice-president at Morgan Stanley and had an advanced business degree from the University of California at Irvine, both of which claims are false, the SEC alleges. His whereabouts are a mystery, with a company spokesman saying he travelled to China on a "religious pilgrimage".