IT IS four months ago this week since the Irish and British financial regulators began investigating whether short-selling investors, who bet on shares falling, took unfair advantage by spreading false rumours about the banks while trading on the back of them.

The market is none the wiser yet about whether action will be taken as a result of these inquiries. The stocks examined by the Irish regulator were Anglo Irish Bank and, to a lesser extent, Irish Life Permanent. Anglo took a trouncing on March 17th, dropping 23 per cent in trading before closing that day down 15 per cent.

All the Dame Street-based regulator has stated publicly is that it is continuing to examine hundreds of thousands of trades in March. It's understood that there are still a few lines of inquiry that the regulator is chasing that could lead to some reprimand, but the investigation is expected to conclude ultimately that there was a lot of loose (and erroneous) talk between traders and clients about the strength of the Irish banks.

The talk seems to have centred on possible rights issues and depositor withdrawals, and was just plain wrong. Some traders may have simply been trying to curry favour with clients by appearing to have an inside track.

However, most of the profits by short-sellers on stocks seems to have been taken in the UK.

In the Republic, it appears to have been simply just chatter, but the concern within banking and official circles was that the talk could have turned more serious, for example, leading to a run on deposits. As witnessed this month at Californian bank IndyMac, a sudden run on deposits can bring a financial institution down quickly.

The financial regulator will likely end up publishing some class of a code of practice for stockbrokers to guide them in future. The regulator will hardly be able to stop traders telling clients about rumours in the market, but the traders will be encouraged to inform clients when passing on certain information that the source is nothing more than rumour.

The main effect of the investigation has been to put an end to many of the more outlandish rumours that have circulated about the banks.

Anglo's legal action against London stockbrokers Mirabaud Securities to identify the sender and recipients of an e-mail sent in February conveying a false rumour has shown that the bank is willing to fight on its own.

But the regulator is likely to resort to some finger-wagging at the stockbroking community.