[JURIST] New York Attorney General Andrew Cuomo [official website] Thursday said his department is conducting an investigation [AP report] into whether some investors used illegal methods to profit from recent declines in banking and insurance stocks. It is alleged that some investors combined the short-selling [Forbes backgrounder] of stock with the spreading of false information to illegally gain from recent devaluations in Lehman Brothers, AIG [corporate websites] and other stocks. Cuomo said his office will prosecute those found to have intentionally contributed to the declines under a New York law [Martin Act backgrounder, PDF], which gives him broad authority to investigate financial crimes. On Friday, the Securities and Exchange Commission (SEC) implemented a temporary ban [press release; revised rules, PDF] on certain kinds of short-selling of key financial stocks in an attempt to stabilize their values [NYT report]. Bloomberg has more.
In an effort to better detect other kinds of financial fraud, including insider trading [JURIST news archive], in August the SEC announced [press release; JURIST report] that it had reached a tentative agreement [PDF text] with ten US stock exchanges to centralize insider trading controls among the institutions. Under that plan, the programs to prevent and detect insider trading will be monitored by the Financial Industry Regulatory Authority (FINRA) and a section of the New York Stock Exchange (NYSE) [corporate websites], instead of having each exchange run its own program.