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WASHINGTON (AP) - Lawmakers on Wednesday said tighter regulation of hedge funds may be necessary to protect ordinary investors from unforseen losses.

That was the consensus among many Democrats, and some Republicans, at a House hearing focused on Bush administration recommendations for managing the economic risks posed by hedge funds and their high-dollar cousins, private equity firms. But lawmakers also expressed uncertainty about how to proceed without further study of the issue.

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The Bush administration recommendations, made in February, call for increased vigilance on the part of regulators, investors and lenders, but not any new regulation.

Rep. Carolyn Maloney, D-N.Y., and other members of the House Financial Services Committee voiced concern about the fallout from the recent near collapse of two hedge funds managed by Bear Stearns Companies Inc.

Since many public pension funds invest in hedge funds, such difficulties could hurt the retirement savings of schoolteachers, firefighters and other employees, members of the committee said.

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"I don't think anybody can be entirely confident that everything is well here, but neither is it obvious what to do," said Barney Frank, D-Mass., chairman of the House Financial Services Committee.

Frank said the panel wouldn't "rush to regulate," but he noted that many of the bad loans that have roiled the mortgage markets were made by brokers and other unregulated entities.

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The Bush administration guidelines were issued by the President's Working Group on Financial Markets, which was formed after the 1987 stock market crash. The group is led by Treasury Secretary Henry M. Paulson and includes the heads of the Federal Reserve, the Securities and Exchange Commission and the Commodity Futures Trading Commission.

The hearing is the third in a series by the House Financial Services panel this year on hedge funds and private equity firms, which are attracting increasing scrutiny in Washington.

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Both have grown rapidly in size in recent years, heightening their potential impact on the broader financial markets

Hedge funds, which trade rapidly in everything from commodities to real estate to complex derivative investments, now control approximately $1.4 trillion in assets.

The Securities and Exchange Commission on Wednesday adopted a new anti-fraud rule for hedge funds. The rule, adopted by a unanimous vote of the five SEC commissioners, makes it a "fraudulent, deceptive or manipulative act" for hedge fund managers to make false or misleading statements to or otherwise deceive investors or prospective investors.

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