Senate Judiciary Committee Chairman Arlen Specter is ramping up
his investigation of hedge funds by calling on SEC Chairman Christopher Cox for a private meeting to discuss what he believes is the agency's poor record in cracking down on fraud and abuse in the business, CNBC has learned.

The meeting, which could take place as early as next week, comes after a former SEC investigator, Gary Aguirre, said he was fired from the commission when he tried to take testimony from Morgan Stanley CEO John Mack in an investigation of possible insider tradingby the large hedge fund Pequot Capital. Aguirre has said that Mack was the possible leaker of insider information to Pequot, a charge that Mack denies, and one that at least initially the commission didn't take seriously.

But the SEC recently did an about-face, and has now called Mack to give a deposition in the Pequot case. CNBC has learned that Mack will give his testimony next week, and according to people close to the case, the SEC is concluding its investigation into Pequot. Mack's testimony will be one of the final official acts before the commission decides whether to drop the case or file charges, these sources add.

Specter is expected to question Cox on a number of issues involving Aguirre's investigation, but also the broader issue of how well the commission investigates hedge funds, according to people close to the matter. These people say that while Aguirre doesn't appear to have a smoking gun that points to Mack violating insider trading laws, Specter believes that the agency erred in not taking Mack's testimony earlier, and will likely point that out during the meeting.

One interesting point: Specter's foray into hedge fund regulation could set up a nasty political battle between the Senate Judiciary Committee and the Senate Banking Committee, which has direct oversight of the SEC.