NEW YORK (CNN/Money) - The NASD is looking into the way Wall Street's top firms are marketing white-hot hedge funds to individuals, according to a Bloomberg report.

The NASD, a self-policing organization that oversees about 5,200 brokerages, sent letters in June to about 10 firms, including Citigroup Inc., Merrill Lynch & Co. and UBS AG, asking them what kinds of warnings they gave investors when selling hedge funds with minimum investments of $50,000 or less, according to Bloomberg, citing people familiar with the probe.

The NASD is looking into whether the brokerages tried to entice "non-professional" customers -- or individual investors -- into making hedge fund investments that were either too risky or too expensive for that type of customer.

But the inquiry should not be interpreted as a sign that investigators have concluded that the firms violated rules or securities laws, Bloomberg said.

"The marketing and sales of hedge funds to individual investors has been an ongoing focus of the NASD," said Barry Goldsmith, executive vice president of enforcement at the NASD, in a statement. But the agency declined to comment specifically on the June letters.

Hedge funds are designed for big-ticket investors -- institutions with large portfolios or wealthy families looking to preserve their nest eggs.

Hedge funds often employ riskier strategies than those used by traditional mutual funds, such as shorting stocks or using leverage, the practice of borrowing money to juice up returns.

Also, hedge funds tend to be less flexible for investors than traditional funds -- many require a one-year commitment at the outset, and afterward might only allow quarterly redemptions.

But because of disappointing returns in traditional investments over the past few years, hedge funds' appeal to individuals has skyrocketed. An individual cannot invest in a hedge fund without first meeting minimum standards -- an annual income of $200,000 for two consecutive years (or $300,000 with a spouse) or a net worth of at least $1 million.

Those are seemingly large hurdles, but the number of U.S. millionaires has climbed since the accredited investor standard was first defined in 1982. There are now 2.5 million, according to the World Wealth Report from Merrill Lynch and CapGemini.

Also, several Wall Street firms have begun marketing funds that charge $50,000 to get in, a far cry from the typical hedge fund minimum investment of $1 million -- though the same income- and net-worth restrictions still apply.

A handful of Wall Street firms are offering "funds of funds," or products that invest in a portfolio of individual hedge funds, with minimums of $25,000 to $50,000. These firms include Credit Suisse First Boston, J.P. Morgan, Deutsche Bank and Merrill Lynch.

The NASD has fined firms for what it deems improper hedge fund sales practices.

Last October, it slapped Citigroup Global Markets with a $250,000 fine, alleging the group distributed inappropriate sales literature for its hedge-fund products and that the literature failed to adequately disclose risks and improperly used a hypothetical rate of return without sound evidence to back it up.

In 2003, the NASD levied a $175,000 fine against California-based hedge fund firm Altegris Investments, charging that the firm didn't adequately reveal in its sales literature the risks involved in hedge fund investing.

Citigroup, Merrill Lynch and UBS each declined to comment.