The whole reason hedge funds are booming is precisely because they are unregulated. There are few restrictions, and as a result you have a wild and wooly ecosystem that occasionally spawns brilliant ideas. Economics 101. Less regulation generates large average upside.
[Snip] "...The timing of the news of the investigation, first reported by the New York Times on Friday, may not have been accidental, some sources speculated suggesting that SEC staffers who favor stricter oversight may have been happy to leak it.
In a nutshell, a lawyer named Gary Aguirre, who was fired from his job at the SEC in September, said in a letter to two U.S. senators that the agency stifled a probe last year into a hedge fund, later identified as Pequot, because Aguirre wanted to subpoena the former chief executive of a large investment bank.
The New York Times said that government sources identified the person Aguirre was trying to question as John Mack, who now runs Morgan Stanley (MS.N: Quote, Profile, Research) after having briefly been Pequot's chairman.
After a year of silence, Aguirre told Senators Chuck Hagel and Christopher Dodd: "There is growing evidence that today's pools -- hedge funds -- have advanced and refined the practice of manipulating and cheating other market participants."
His message seems to have come just in time for lawmakers to mull over as they go back to the drawing board..."
The SEC had to horribly mangle the english language to try to come up with the reasons for the rule. And the court slapped it down as arbritrary. Also, a WSJ article said "But many hedge funds and other critics argue that the rule is cumbersome, costly and gives unskilled SEC staffers license to look for problems where none exist." Sounds like they were talking about what we are seeing with former SEC enforcement attorney Gary Aguirre...