Federal regulators are cracking down on the potential spread of false and misleading rumors that could potentially affect market conditions.

While rumor mongering is not a widespread problem in the financial industry, a few high-profile cases-the SEC investigating 50 hedge funds last week for potentially spreading rumors on the fall of Bear Stearns and Lehman, and halting shorting Freddie Mac and Fannie Mae-have forced regulators to take a strong public stance against such actions. Then there were the arrests last month of former Bear Stearns hedge fund managers Ralph Cioffi and Matthew Tannin for securities fraud and the April settlement of securities fraud and market manipulation charges by Paul Berliner, a former trader with the Schottenfeld Group.

Subscribe Now

Access to premium content including in-depth coverage of mutual funds, hedge funds, 401(K)s, 529 plans, and more.

3-Week Free Trial

Insight and analysis into the management, marketing, operations and technology of the asset management industry.