US securities regulators on Wednesday night said they would subpoena hedge funds for their past trading records.
Christopher Cox, SEC chairman, said: ??In order to ensure that hidden manipulation, illegal naked short selling, or illegitimate trading tactics do not drive market behavior and undermine confidence, the SEC today took several actions to address short selling abuses.?
Enforcement officials will send subpoenas to hedge funds and other institutional traders who bought and sold shares of 19 financial firms, including investment banks and mortgage financiers Fannie Mae and Freddie Mac.
In addition, regulators are considering a new disclosure rule, on an emergency basis, that would require hedge funds and other large investors to disclose their short positions.
Earlier in the day, the agency announced a separate set of new rules against 'naked' short-selling, including requiring short sellers and their broker-dealers to deliver securities borrowed for short sales on the settlement date, three days after the transaction ?? or face penalties.
Some market participants say abusive short sellers have contributed to the fall of companies such as Lehman Brothers by forcing down share prices.
