The Watchdogs' Next Target: Hedge Funds

These freewheeling, high-risk investments have federal and state regulators alarmed. This time around, though, the SEC is in the lead

Now that federal and state securities regulators have cracked down on Wall Street analysts for their conflicts of interest, the watchdogs are training their sights on a new target: hedge funds. State authorities, alarmed by the explosive growth of these private investment pools and by a string of fraud cases, are pressing the Securities & Exchange Commission to bring the lightly regulated hedge-fund industry to heel. They're admonishing the SEC to act fast -- or risk being upstaged. "We're not going to stand around and wait for something to happen," says S. Anthony Taggart, director of the Securities Division of Utah's Commerce Dept.

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