Hedge funds are a type of investment entity that have been in the spotlight for insider trading issues. The Securities and Exchange Commission (SEC) has been focusing on cases involving insider trading within hedge funds due to their structure and lack of regulation. Hedge funds operate without needing to register with the SEC, have a small number of investors, and can use leverage freely. The SEC has faced challenges in enforcing insider trading laws against hedge funds, leading to concerns about widespread insider trading in these funds.