SEC quants find signs of ‘cherry picking’ at US hedge funds

Speaking at a conference in Boston, regulator also warns hedge funds over “technical non-compliance” with marketing, custody and valuation rules

Securities and Exchange Commission headquarters

Tools developed by the Securities and Exchange Commission's (SEC) recently formed quantitative analytics unit have identified potential evidence of 'cherry picking' at 13 hedge funds – the practice of assigning winning trades to personal accounts or favoured clients, while losing trades are sent elsewhere.

The regulator used its freshly minted quantitative tools to analyse two years of trading activity across more than 200 hedge fund accounts at a major prime brokerage firm.

Andrew Bowden

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