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SEC mounts attack on the rumor mill

Boston Globe- The Securities and Exchange Commission yesterday said that it and other regulators would begin examining rumor-spreading intended to manipulate securities prices.

The timing of the announcement, made before the markets opened in Asia, was meant to warn broker-dealers, hedge funds, and investment advisers to quell any spreading of rumors before trading started today.

The SEC has been engaged in an internal debate over what kind of investigation to mount with respect to rumors. The turbulence in the markets last week, with rumors adding to concerns about fundamentals affecting commercial banks, investment banks, and the government-chartered enterprises Fannie Mae and Freddie Mac, sped the decision to begin the examination and make it public.

"Traders know there is false information in the market. They need to think twice if they are going to pass it on," said Lori Richards, an SEC official.

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