April 27, 2009 / 6:55 PM / 11 years ago

UPDATE 3-U.S. SEC has about 150 hedge fund probes-Schapiro

(Adds Schapiro’s further details on number of derivatives’ probes in paragraphs 1, 7)

DENVER/WASHINGTON, April 27 (Reuters) - U.S. securities regulators have about 150 active hedge fund investigations and more than 50 probes involving credit default swaps and other derivatives, Securities and Exchange Commission Chairman Mary Schapiro said on Monday.

The SEC also has about two dozen active municipal securities investigations, possibly involving arbitrage-driven fraud, public corruption and price transparency, Schapiro told a conference of business journalists in Denver.

Schapiro, who has made enforcement one of her top priorities since taking the helm late in January, said the hedge fund investigations include possible Ponzi schemes, where early investors are paid with money from newer investors, misappropriations and performance smoothing.

Last year, the SEC ordered more than two dozen hedge funds, broker-dealers and big investors to hand over information about their trading in the securities of certain financial institutions such as American International Group (AIG.N) and Lehman Brothers.

The order came as U.S. markets were in a tailspin and financial services executives, investors and lawmakers feared market rumors would destroy Wall Street.

The SEC took steps to crack down on market manipulation and rumor mongering and the agency said investors with significant trading activity in financial firms or positions in credit default swaps would be required to disclose those positions to the SEC.

Schapiro said the agency has more than 50 active investigations involving credit default swaps, collateralized debt obligations and other derivatives-based investments.

Schapiro hired former federal prosecutor Robert Khuzami to lead her agency’s enforcement division, which has been criticized by lawmakers for having missed opportunities to stop Bernard Madoff’s massive investment fraud.

She has embarked on an ambitious agenda to give shareholders an easier and cheaper way to nominate board directors and is looking at better disclosure for municipal securities, among other things. (Reporting by Walden Siew in Denver and Rachelle Younglai in Washington; Editing by Maureen Bavdek, Bernard Orr)

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