The Bernard Madoff Ponzi scheme was the wake-up call, of course. But there were a number of other suspected frauds, like the Galleon fraud and others that, even if they were not strictly related to hedge funds, have galvanized the SEC. While the exact nature of regulatory change is still unclear, the New York office of the SEC has big plans. According to hedgefund.net, there's a new sheriff in town and he wants the hedge fund industry to listen up.

"We have planned a number of significant sweeps of investment advisors," George Canellos, the new New York SEC Regional Director told the publication. "In the last few months--really in the last year or two--we have tried to orient our program, especially the investment management program, more toward cause- and risk-based exams."

The new approach calls for the agency to sweep firms that it deems to pose higher risks of law violations. The agency is also beefing up its in-house training. Lots of other activity is also in the works. The Galleon case exposed the newly aggressive tactics of prosecutors.

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