Bloomberg – The U.S. Securities and Exchange Commission may require hedge funds to disclose their short-sale positions and plans to subpoena the funds’ communication records in an effort to stem turmoil in stock markets.

Hedge funds and investors managing more than $100 million in securities would be “required to promptly begin public reporting of their daily short positions,” Chairman Christopher Cox said in a statement yesterday. The proposed disclosure is in addition to three SEC rules that took effect today aimed at reducing manipulative trades betting on a drop in share prices.

Lawmakers including U.S. Senate Banking Committee Chairman Christopher Dodd and executives such as Morgan Stanley Chief Executive Officer John Mack say short sellers may be spreading false information and using abusive tactics to attack companies. Hedge funds say poor business strategies are to blame and an industry spokesman said the SEC announcement was “abrupt.”

“The consequences of a hasty or ill-considered rule in this environment could be extremely harmful to the capital markets,” said Jim Chanos, chairman of the Coalition of Private Investment Companies, which represents 20 funds with assets in excess of $120 billion. “Such a requirement is akin to the government suddenly requiring Coca-Cola to disclose their secret formula for free to all their competitors.”

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