Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Saturday, September 20, 2008

SEC Expands Manipulation Investigation

The SEC announced a sweeping expansion of its ongoing investigation into possible market manipulation in the securities of certain financial institutions. Hedge fund managers, broker-dealers, and institutional investors with significant trading activity in financial issuers or positions in credit default swaps will be required, under oath, to disclose those positions to the Commission and provide certain other information.  The Commission also approved a formal order of investigation that will allow SEC enforcement staff to obtain additional documents and testimony by subpoena. Investigators from NYSE Regulation and FINRA will be conducting a separate, parallel inquiry in coordination with the SEC by making on-site visits to various broker-dealers to address concerns about recent short selling activity.

The Commission's actions follow recent reports of trading irregularities and allegations of false rumor mongering, abusive short selling and possible manipulation of financial stocks.

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