The UK's City watchdog launched an inquiry into potential stock market abuse today after it said traders had been profiting from spreading false rumours.
The Financial Services Authority (FSA) in England warned it would not tolerate traders starting rumours and dealing off the back of them in the current market turmoil.
Halifax Bank of Scotland has reportedly been at the centre of the rumours after its shares plunged amid speculation of funding problems. HBOS strongly denies any such problems.
Sally Dewar, managing director, wholesale and institutional markets at the FSA, said: “There has been a series of completely unfounded rumours about UK financial institutions in the London market over the last few days, sometimes accompanied by short-selling.
“We will not tolerate market participants taking advantage of the current market conditions to commit abuse by spreading false rumours and dealing on the back of them.
“We remind market participants of the need to take extra care, in this market climate, to adhere to the market code of conduct.”