NEW YORK — The real threat to the wretched U.S. financial system is apparently not narcoleptic rating agencies, or indiscriminate lenders, or even gluttonous investment bankers. At least that's the conclusion one might draw by parsing this weekend's statement from the U.S. Securities and Exchange Commission, which hinted at a far more pervasive – and elusive – villain: gossip.

On Sunday, America's top stock market cop announced plans to crack down on the intentional spread of misinformation, adding its muscle to a growing regulatory effort aimed at defusing the crisis on Wall Street.

But there's a significant glitch, say lawyers, academics and former SEC officials: The plans have little chance of succeeding.

“It's a noble quest, but it's a little like tilting at windmills,” said John Coffee, a Columbia University law professor who specializes in securities regulation. “Most of us pass on gossip every day.”

The SEC's move came amid heightened concern that short sellers and hedge funds have been peddling lies about several large financial companies – Bear Stearns Cos. Inc. and Lehman Brothers Inc. among them – in an effort to drive down their stock prices and profit from the resulting slide. As of mid-June, short positions in Fannie Mae had increased threefold since the previous August; the short interest at Freddie Mac had increased to 77 million shares from 17 million last summer.

Last week, shares in Fannie Mae and Freddie Mac also plunged amid rumours about their capital positions. The U.S. Federal Reserve Board intervened Sunday with promises of financial aid to the two government-chartered mortgage companies, while the Treasury said it would seek approval to extend their credit lines.

Critics of this regulatory rescue effort point out that there were serious problems at all of these companies before the rumour mill kicked into high gear – that poor risk controls, greed, and bad management bear the brunt of the blame.

Yet even if malicious chatter has exacerbated the problems, the SEC still faces a monumental challenge in finding and punishing offenders.

Information is the ubiquitous lubricant of the markets, and it is almost often mediated in some form. Hunches are hunches, and there are myriad shades of grey between a well-informed guess and an ill-considered one, making it difficult to separate truth from fiction. There is also the problem of intent: Did a trader know certain rumours were false when he or she fed them to someone else? Or was this merely the decades-old tradition of trading information, and then sifting through the noise in search of some added advantage?

“I think that the SEC is putting out a prophylactic to discourage this activity, but I think realistically it will be really difficult to bring cases,” said Stephen Crimmins, a partner at Washington law firm Mayer Brown LLP, and a former deputy chief litigation counsel in the SEC's enforcement division. “It's extremely difficult to trace and very amorphous in nature.”

The SEC's inspections unit, along with the Financial Industry Regulatory Authority and the New York Stock Exchange's regulatory arm, intend to examine brokerages and trading firms to ensure their compliance and training procedures are sufficient to prevent the spread of false information. The SEC also said it is currently investigating alleged manipulation of stocks “through rumour-mongering and abusive short selling.”

Companies have complained for years that short sellers targeted their shares and used nefarious tactics to wipe out market value. Prof. Coffee argued that the SEC has actually deregulated short selling in recent years, and said the main reason it is acting now is because it under pressure “to be seen to be doing something.”

But the SEC's announcement did little to help calm the turmoil in financial stocks yesterday, which continued their descent in anticipation of poor quarterly results later this week – a problem seemingly rooted much more in fundamentals than misleading chatter.

Jim Doty, a former general counsel at the SEC, agreed that it has always been a challenge to find evidence of manipulation or collusion among short sellers – the regulator's twin areas of concern.

Like others, he suggested the SEC was motivated to move this weekend because of the gravity of the current economic mess – not because it necessarily harbours the conviction it can arrest the flow of intentionally false rumours.

“It's difficult to imagine the SEC doing anything like this in the absence of the present crisis of confidence in the financial system,” said Mr. Doty, now a partner at Baker Botts LLP in Washington, D.C. “This is much more like 9/11: They see something that they feel requires some kind of response from them.”