US securities regulators are considering sweeping changes to rules governing "short-selling", a controversial trading practice that has reached record levels during the bear market.

A clampdown could fundamentally alter the way many stocks are traded in the US and limit the profit potential of hedge funds and other active traders.

Regulators around the world are under pressure to tighten rules on short-selling - in which traders bet that a stock price will fall - amid concern that it is used by professional traders to manipulate share prices, particularly of smaller companies.

Riverdeep chief executive Mr Barry O'Callaghan blamed the practice for the decline in his company's share price, which saw it give up its US listing before its current management buyout bid.

Staff at the Securities & Exchange Commission (SEC) are expected to present proposals for reform next week to Mr William Donaldson, the new chairman. SEC officials pressed Mr Harvey Pitt, his predecessor, to take up the issue but without success.

Any attempt to limit short-selling activities will be criticised by traders and some economists, who argue that it should be less restricted because it makes for a more efficient and liquid market.