The FSA is investigating whether false rumours are being deliberately spread to undermine the value of shares. They are pointing the finger at "short sellers" - people who sell stocks they don't have (using derivatives based on the stock's current share price) and then buy when the price goes down. Apparently these people are behaving irresponsibly, or unpatriotically, or something like that. (By following the maxim "buy low, sell high", which I thought the whole financial system was based on... but never mind).
This was sparked by the big fall in the price of HBOS (Halifax/Bank of Scotland) shares last week after rumours that the bank was in trouble. But, given that Bear Stearns was insisting it was in fine financial fettle until about 24 hours before it collapsed and had to be bailed out by the US Federal Reserve, can anybody blame financial traders for believing negative rumours? Might it not be more rational to believe bad news about banks than good news in the current climate?
How on earth are the FSA going to identify the people starting the rumours, anyway? Everyone will just say they were going on information they heard elsewhere and the whole thing will go round in a circle. So, short of fining all market participants, there doesn't look like much the FSA can do. Their statement looks like complete hot air to me, and if anything, is likely to spook the markets even more. In the current climate, if someone in authority tells you everything is all right, it almost definitely isn't. As soon as another UK bank gets into Northern Rock - style difficulties - which will probably happen soon - the FSA's stance will be blown right out of the water. Better to say "we are in uncharted waters, and caveat emptor" (or indeed caveat vendor) as far as financial transactions go". But they would prefer to bullshit people... so be it.
Anyone who is buying and selling in the current climate (rather than holding on for a reversion to normal market conditions, which will surely come at some point, even if a few years down the line - and if it doesn't it probably means the whole system has collapsed, in which case why the hell are you still bothering with stocks and shares when we've got a new society to construct - GET OUT ON THE STREETS!!!) is a moron in any case, and deserves what they get. (Or someone who has been very badly financially advised, in which case... SUE.)