The Security and Exchange Commission most likely will be going after those hedge funds that have weak internal controls, says Elizabeth Jacobs, the SEC’s deputy director of the Office of International Affairs. Speaking to a HF conference in the Cayman Islands, Jacobs says such “high risk” funds can expect to be audited every three years, but she did not describe what criteria would be used to determine which funds have poor internal control. If past cases are any indication, however, this would include those funds that the SEC has gone after with charges of insider trading and market manipulation – telltale signs that a fund may be out of control. By the way, there may be a lot more hedge funds out there than commonly believed, according to Reuters. While Hedge Fund Research puts the number at more than 8,800, based on the 2,400 fund managers who have registered with the SEC, there may be more like 11,500 – and that doesn’t include the estimated 35% of total funds that lawyers say have legally skirted registration.