HBOS shares plummeted almost 18% to 398p yesterday as rumours emerged of liquidity problems at the bank.
Both HBOS and the BoE dismissed the rumours as rubbish, leading to allegations of market manipulation.
Sally Dewar, managing director, wholesale and institutional markets at the FSA, says: “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.”
She adds: “We remind market participants of the need to take extra care, in this market climate, to adhere to the market code of conduct.”