New York Attorney General Andrew Cuomo said Thursday that he is starting a "wide-ranging" investigation into short-selling on Wall Street, particularly in financial stocks.
On a conference call with reporters, Mr. Cuomo said he intends to use New York's Martin Act to prosecute short sellers who spread false rumors and engage in other improper conduct. He said he is looking into short-selling in a number of financial firms' stocks, including Lehman Brothers Holdings Inc., American International Group Inc., Goldman Sachs Group Inc., and Morgan Stanley Inc.
He said the Securities and Exchange Commission must temporarily suspend short-selling of financial stocks, preferably for 30 days. "The markets need to be stabilized," he said. "One way is to root out short sellers who spread false information."
The federal government has been "ineffective" in regulating the financial markets, Mr. Cuomo said, and much of the markets' troubles are tied to mortgage fraud. "The federal regulatory structure has failed this country," he said.
Mr. Cuomo stressed that short selling is legal but said he will pursue civil and possibly criminal charges against those who engage in it improperly. "You can't spread false information," he said. "You can't conspire to spread false information to manipulate the price of a stock."