NASD probing broker hedge-fund sales - Regulator focusing on sales to individual investors

By Alistair Barr
MarketWatch
Aug. 17, 2005

"The marketing and sales of hedge funds to individual investors has been an on-going focus of NASD," said Barry Goldsmith, executive vice president of enforcement at the NASD, in a statement. "We are continuing to look at issues in this area but cannot comment on any of the specifics"...

The NASD asked the firms what warnings they gave investors when selling hedge-fund products with minimum investments of $50,000 or less and whether they paid brokers sales incentives, Bloomberg reported.

The NASD said in its letter that the probe should not be construed as a sign that investigators have concluded that the firms violated rules or securities laws, the report added, citing a copy of the June 22 letter. NASD spokesman Tom Holloman declined to comment on the letter or on which companies are being investigated....

NASD investigators are looking for evidence that the firms tried to sway nonprofessional customers to make unsuitably risky or expensive investments, Bloomberg said....