(Adds detail, comment from Hedge Fund Standards Board)

LONDON, Dec 15 (Reuters) - Hedge fund trade association the Alternative Investment Management Association (Aima) called on Monday for restitution for investors caught out by an alleged $50 billion fraud at New York hedge fund firm Madoff Securities.

“Clearly, lessons must be learned, restitution must be secured for investors, and processes/safeguards must be improved to prevent such a situation recurring,” said a spokesman for the association, which is based in London but has 1,280 members worldwide.

A growing list of the world's big banks and financial institutions including Royal Bank of Scotland RBS.L, France's Natixis and Japan's Nomura 8604.T have been lining up to acknowledge multimillion dollar exposure to Madoff funds.

Bernard Madoff was arrested and charged on Thursday with allegedly running a $50 billion “Ponzi scheme” in what may rank among the biggest fraud cases ever. A Ponzi scheme pays profits to early investors from money received from later entrants and needs an accelerating stream of new investors to keep running.

Aima, alongside its U.S.-based counterpart the Managed Funds Association (MFA), has been at the forefront of hedge fund industry efforts to devise a voluntary code of conduct to head off an expected increase in regulation.

It called the allegations of fraud at Madoff Securities an “extraordinary situation”, but the revelations will likely add to pressure on regulators for stricter oversight of the industry as a whole.

For decades the $1.5 trillion hedge fund industry has avoided the strict rules imposed on mutual funds as their managers argued that their clients were wealthier, more savvy investors who required less protection.

Antonio Borges, chairman of the Hedge Fund Standards Board set up to oversee application of voluntary industry guidelines, said: “The Madoff scandal highlights just how important it is to have independence of process in relation to administration of the fund and the valuation process.

“It also highlights the need for robust governance practices and oversight via independent boards, which will challenge management procedures and behaviour,” he said in a statement issued on Monday. (Reporting by Joel Dimmock, editing by Will Waterman)