By Cydney Posner

The SEC announced on Sunday that it, FINRA and NYSE regulation will immediately conduct examinations aimed at the prevention of the intentional spread of false information intended to manipulate securities prices. Examiners will focus on supervisory and compliance controls required for broker-dealers and investment advisers and whether they are reasonably designed to prevent the intentional creation or spreading of false information intended to affect securities prices or other potentially manipulative conduct. These examinations are in addition to the SEC's enforcement investigations into alleged intentional manipulation of securities prices through rumor-mongering and abusive short selling that are already underway.

According to the NYT article today, there has been an internal debate at the SEC regarding the type of investigation to conduct with respect to rumors, especially given the difficulty of establishing these cases. Top-level Wall Street executives, such as Jamie Dimon, have been publicly beseeching regulators to investigate alleged efforts by short sellers to profit from circulating false information, which they see as an increasing problem. (See the fascinating play-by-play on the Bear Stearns debacle by Bryan Burrough.) The NYT article reports that the turbulence in the markets last week, with rumors adding to concerns about fundamentals affecting commercial banks, investment banks and Fannie Mae and Freddie Mac, sped the decision to begin the examination and make it public.

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