The ghost of Raj Rajaratnam still haunts hedge funds. Some make employees sign pledges that they’ve not acted on illicit tips, others snoop on their traders with keystroke-reading software. At the compliance meetings everybody has these days, prison isn’t an off-the-wall topic.

The illegal-trading probes that netted crooks at more than a dozen funds may have reached an unofficial finale with a whimper last week -- a deal allowing SAC Capital Advisors LLC’s Steven A. Cohen to return to the industry in two years -- but the chill from the fates of Rajaratnam and the 75 others convicted hasn’t faded. The legacy of the crackdown might be a healthy suspicion that Big Brother really is watching.

“It’s now been drilled into the public consciousness that insider trading is a high-risk proposition,” said Stephen Crimmins, a lawyer with the U.S. Securities and Exchange Commission from 1987 to 2001 who’s now with the firm Murphy & McGonigle. “Ten years ago, people figured that the odds were pretty good that they wouldn’t get caught.”

True, Wall Street’s probably not as spooked as it was just after Rajaratnam’s 2009 arrest and 2011 sentencing to 11 years in prison. The government also alarmed traders by building its case against the billionaire fund manager with wiretaps and informants, tools typically pulled out when the marks are drug dealers or racketeers. One reason there’s less anxiety is the U.S. Supreme Court decision in October to let stand a ruling that overturned two convictions, led to the dismissal of 12 cases and made it harder to prove insider trading by requiring evidence a tip’s recipient knew the leaker got a concrete benefit.

But changes in policy and behavior spurred by the indictments, raids and liquidations of the past seven years might be here to stay, even with Cohen, prosecutors’ biggest quarry, having gotten away with a relatively light slap.

‘Watching Headlines’

That’s in part because “there’s a recognition now that if there’s a case against you, that’s already a loss” because of the negative publicity, said Ron Geffner, a partner at Sadis & Goldberg LLP and a former SEC enforcement lawyer who represents hedge funds. Investors pulled millions out of funds and some firms shut down even though charges against their employees were dropped or never even filed.

The reverberations have extended to the Wharton School of the University of Pennsylvania, whose alumni include convicted insider-traders Rajaratnam, Rajiv Goel and Anil Kumar. It has a renewed focus on business ethics and a required course called Responsibility in Professional Services taught by David Zaring, a former U.S. Justice Department lawyer. “My students do watch the headlines,” he said. “They’re pretty interested in recent prosecutions and seem relatively worried to me, so that’s good news for the government.”

Fund compliance officers dial in to more conference calls with analysts than before, and former regulators and prosecutors are popular hires. Consulting firms are getting new business. “We’re seeing a significant spike in terms of hedge funds coming to us not only to have us vet and monitor their employees but also in terms of investigational due diligence on actual deals,” said Julian Moore, senior managing director at K2 Intelligence LLC, which counsels funds on compliance and cyber-security.

Some firms monitor e-mail and instant-message communications and have banned personal trading accounts, and are hiring legal advisers to help keep themselves in line. “It’s much more often that we have the founders of a firm, or top principals, in key training sessions,” said Steve Nadel, a partner at Seward & Kissel LLP, which offers regulatory compliance coaching.