SEC Stops Short of Hedge Fund Crackdown

Updated from 10:52 a.m. EDT

Securities regulators are considering requiring hedge-fund managers to register as investment advisers, a move that could subject the $600 billion industry to periodic inspections for the first time.

The recommendation is contained in a long-awaited Securities and Exchange Commission report on the state of the hedge fund business. SEC officials released the report at a Monday morning press conference in Washington.

"The staff is concerned that the commission's inability to examine hedge fund advisers makes it difficult to uncover fraud and other misconduct," the report said. "The commission typically is able to take action with respect to fraud and other misconduct only after it receives relevant information from third parties." ...