June 26 (Bloomberg) -- The U.S. Securities and Exchange Commission's docket of probes stemming from the subprime- mortgage crisis has grown at least 40 percent since January amid mounting investor losses and the collapse of Bear Stearns Cos., a person familiar with the agency's caseload said.

The SEC has more than 50 open inquiries relating to the credit-market turmoil, compared with about three dozen in January, the person said, declining to be identified because the cases aren't public. SEC lawyers are examining suspected fraud, market manipulation and breaches of fiduciary duty.

Global credit markets froze last year amid rising defaults on mortgages to the least creditworthy borrowers, triggering almost $400 billion in losses and writedowns at the world's biggest banks and securities firms. Still, the surging caseload may not lead to a wave of civil and criminal charges, as many inquiries are in early stages and hinge on accounting questions.

``The government is doing what it ought to be doing, which is looking,'' said David Becker, a former SEC general counsel now in private practice at Cleary Gottlieb Steen & Hamilton LLP in Washington. While the losses are severe, ``what we don't know is whether there is any fraud that took place.''

Bear Stearns

Last week, the SEC teamed up with the U.S. Attorney's Office in Brooklyn to file the first federal charges over Wall Street's handling of the subprime crisis, hauling former Bear Stearns hedge-fund managers Ralph Cioffi and Matthew Tannin to court in handcuffs. They face criminal allegations they misled clients about pending losses and redemptions before two funds collapsed under bad bets on mortgage-backed securities. They are free on bond and deny wrongdoing.

SEC spokesman John Nester declined to comment on the agency's caseload.

Other hedge funds may also face scrutiny. Routine SEC inspections during the subprime crisis have uncovered cases in which investment advisers, including hedge funds, didn't live up to pledges to implement risk controls, a person familiar with the findings said. Lapses include failures to vigilantly track asset values, cap leverage and avoid concentrating bets.

``We've had some very serious matters'' surface during routine checks, Thomas Biolsi, an associate director for the SEC's Office of Compliance Inspections and Examinations, told a legal conference on June 4, declining to elaborate afterward. ``We've had some hedge-fund investors complain to us.''

SEC Chairman Christopher Cox last year started an agency- wide task force to deal with the subprime crisis. The SEC also has a separate working group focused on hedge-fund misconduct.

Inside Information

The Washington-based regulator has said it may look at whether firms and employees manipulated or postponed changes in asset valuations to hide losses from investors. It may check to see whether executives used inside information to profit personally before announcing losses. It is also examining whether brokers steered clients into mortgage-backed securities with inappropriate levels of risk.

U.S. lawmakers, including Senator Jack Reed, have questioned whether the SEC has sufficient resources to deal with the credit crisis. The Bush administration requested $913 million for the agency's 2009 budget, an increase of less than 1 percent. Reed and Senate Banking Committee Chairman Christopher Dodd, both Democrats, have proposed raising the allocation by $50 million.

``These are very, very fact-intensive investigations,'' that include ``difficult accounting issues and involve comprehensive document searches,'' said Gregory Bruch, a former agency attorney who is a partner at Willkie Farr & Gallagher LLP. ``The SEC has severe resource constraints, particularly with something this complex, this difficult.''

`Aggressively' Regulate

Cox told Congress in April that Bush's budget will let the agency ``aggressively'' regulate markets.

``We always find a way to bring the resources necessary to address the problems we're confronted with,'' the SEC's enforcement chief, Linda Thomsen, said today in an interview. As the agency did after the collapse of Enron Corp. and the discovery of widespread stock-option backdating, ``we marshal our resources to protect investors.''

Among the most recent SEC probes to emerge, American International Group Inc. said June 6 it is cooperating with federal inquiries into how it valued mortgage-linked derivatives that wiped out profit for two quarters. New York-based AIG, the world's largest insurer by assets, had downplayed potential losses in December, then said Feb. 11 that auditors found a ``material weakness'' in accounting for the holdings.

Spread Lies

In March, the SEC also opened probes into whether investors including hedge funds spread lies about Bear Stearns and Lehman Brothers Holdings Inc. to profit from declines in the firms' shares, people familiar with the inquiries said at the time. Speculation that Bear Stearns was facing a cash shortage spurred client withdrawals at the 85-year-old firm, forcing its sale to JPMorgan Chase & Co.

The FBI has struggled to keep pace with the growing number of cases. The agency this month told 26 of its 56 field offices to focus on the subprime crisis and stop opening investigations into other financial crimes including price fixing, mass marketing and wire fraud.

FBI officials said last week they are probing 19 companies, including investment banks and hedge funds, for suspected accounting fraud or other white-collar crimes related to mortgage securities. It had 14 such cases in January.

``We recognize that these corporate fraud cases will increase in numbers due to an enhanced level of regulatory and internal-audit reviews by many of these Wall Street firms,'' FBI Director Robert Mueller said June 19. ``We will address these cases as they are identified.''

To contact the reporter on this story: David Scheer in New York at dscheer@bloomberg.net.

Last Updated: June 26, 2008 12:58 EDT