The securities regulator is investigating investment advisory firms that channel investors' money into hedge funds, the Wall Street Journal reported.

The probe will investigate whether the firms are properly supervising client money and dealing with potential conflicts of interest, the report said, citing people familiar with the matter.

The Securities and Exchange Commission's (SEC's) inquiry has identified about a dozen firms for questioning but the list could eventually increase, the newspaper reported.

The SEC could not immediately be reached for comment by Reuters outside of regular U.S. business hours.

The newspaper said the move would be one of SEC's broadest examinations ever of funds of hedge funds and advisers specializing in hedge funds.

The inquiry is a "sweep exam" by the SEC's Office of Compliance Inspections and Examinations, the Journal said, citing documents it had reviewed.

The sweep also could include alternative investment advisers focused on private equity and other registered advisers catering to pension funds, the paper said, citing people familiar with the situation.

The SEC's initial inquiry has involved firms overseeing $100 million to $15 billion in assets, the newspaper said, citing one person with knowledge of the probe.

Funds of hedge funds collect fees from various investors and hand over the money to multiple hedge fund managers.

The advisers collect fees of 1 percent to 2 percent, or as much as $2 million for every $100 million invested. Clients pay additional fees to the underlying hedge funds, the newspaper said.