Hedge Funds and Wall St. Are Warned to Be Vigilant on Misdeeds

The Securities and Exchange Commission expects to file more lawsuits aimed at hedge funds accused of illegal trading and violating their clients’ trust, the agency’s chief enforcer said yesterday.
At the same time, a senior official at the New York Stock Exchange said that Wall Street’s prime brokerages, which lend to hedge funds and process their trades, might be held accountable if they failed to catch illegal conduct.
The S.E.C.’s enforcement director, Linda C. Thomsen, said that federal regulators were concerned about illegal trading and the potential for harm to hedge fund investors.
“I expect to see activity in connection with both,” she said yesterday at a securities conference in Manhattan.