Hedge fund managers may soon face a new regulatory nemesis: Their peers.

Bruce Karpati and Robert Kaplan, the co-chiefs of a Securities and Exchange Commission task force targeting hedge funds, buyout firms and mutual funds, are seeking to add five fund managers, chief operating officers or people with "direct exposure to trading and operations" at investment firms. The SEC placed its help wanted ad last month.

The group is at the center of Enforcement Director Robert Khuzami's effort to boost oversight of the $14 trillion fund industry after frauds, including Bernard Madoff's Ponzi scheme, led lawmakers and investors to question the agency's expertise.

"There's been a lot of soul-searching within the enforcement division and the agency about what is the best way to identify and catch misconduct as early as possible," Kaplan said in an interview.

"Normally, law enforcement is inherently reactive."

The task force is among five specialty units the SEC is forming this year to target misconduct.

Kaplan and Karpati will focus initially on asset valuations, preferential fund redemptions, conflicts of interest and selective disclosure, they said.

"The fund world has become much more sophisticated and complex over the last decade," said Steve Crimmins, a former SEC trial lawyer now at K&L Gates LLP, which represents asset managers. "The SEC hasn't had the resources or the full expertise needed to keep pace."

The SEC struggled to keep up as the number of registered investment advisers jumped 50% to more than 11,000 from 2002 to 2009, the former head of the agency's inspections office, Lori Richards, told Congress last year. The SEC had fewer than 500 employees assigned to examine advisers during those years.

Kaplan and Karpati said they plan to open more probes based on the SEC's own risk analysis in addition to addressing investor complaints.

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