Hedge Funds Not Taking This Insider Trading Probe Lying Down!

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Memo to the Feds- if you've tapped any hedge funds' phone lines, they're paying good money to find out.

Hedge fund managers are hiring security firms to sweep their offices and homes for listening devices, security experts say, in reaction to the US government’s insider trading investigations. “Over the past six months, there has been a really heightened interest in electronic sweeps for hedge funds,” said Christopher Falkenberg, founder of Insite Security, a security and risk management firm in New York. “They’re working harder at clamping down on their information security and making sure the telephones are secured and the offices aren’t being bugged. We’ve also been asked to sweep traders’ homes.”

“We’re definitely getting more calls from hedge funds and smaller financial institutions related to providing services that arise out of the government’s current investigations,” said Andrew O’Connell, chief executive of Guidepost Solutions, a New York investigation and security firm that does not accept requests to search for government listening devices. “The hedge funds calling for these services, which includes sweeps but also compliance guidance, has grown 1000% over the past year.”

Unfortunately these high-priced services...aren't actually that helpful.

Mr Stroz said he counsels clients to think twice before requesting sweeps, noting that “it’s almost never the case” that they have been tapped. “What led you to think this? Is it really worth the effort, or are you thinking back to some movie you saw?” he asks them.

Calling for sweeps may also give hedge fund managers a false sense of comfort. Wire-taps are executed through phone companies without any need to enter a company’s office, security experts say, and cannot be detected during sweeps.

SEC Case Prompts Hedge Funds To Sweep For Bugs [FT]

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