U.S. securities regulators need to be more aggressive in attacking manipulative rumor-mongering and short selling abuses, a prominent New York law firm said Monday.

In a memo to clients, Wachtell, Lipton, Rosen & Katz urged the Securities and Exchange Commission to conduct a 45-day study of the extent to which "abusive and manipulative short-selling and spreading of false rumors is taking place," and to issue a public report on its findings.

The law firm also called for the SEC to adopt rules as appropriate in response to its findings, and to bring enforcement actions against wrongdoers, coordinating efforts with criminal prosecutors where necessary.

Wachtell, Lipton's call to arms came one day after an unusual Sunday announcement from the SEC that it plans to begin immediate examinations into controls at brokerage firms, mutual funds, money management companies and hedge funds to prevent the deliberate spreading of false rumors to manipulate stock prices.

The SEC's examination into industry practices came after a rocky week of trading and concerns about the outlook for federal housing-finance giants Fannie Mae (FNM) and Freddie Mac (FRE) and for commercial and investment banks, including Lehman Brothers Inc. (LEH).

"While this is an important first step, the SEC needs to undertake additional bold measures to constrain abusive short-selling and rumor-mongering," according to the memo, signed by Wachtell, Lipton partners Edward Herlihy and Theodore Levine. The two recently urged the SEC to bring back restrictions on short sales when stock prices are declining, recommending a return to so-called "tick test" that forbade short sales when markets are ticking down.

SEC spokesman John Nester declined to comment.

Wachtell, Lipton is a leading advisor in corporate mergers, including the acquisition of Bear Stearns Cos. by JPMorgan Chase & Co. (JPM). Some former Bear executives have blamed the firm's collapse on market manipulation by short sellers and JPMorgan Chase Chief Executive Jamie Dimon recently said that the SEC should investigate whether Bear was brought down by a smear campaign.

Short sellers sell borrow shares in hopes of replacing them later at a lower price, profiting when the stock declines. While the practice is legal, critics say regulators have been ineffective in curbing abusive, manipulative short selling.

A three-judge panel of the 4th U.S. Circuit Court of Appeals said Monday that Steven Hatfill was a public figure and had to prove actual malice to win his libel lawsuit. The court said Hatfill failed to meet that burden.

Five people were killed and 17 sickened in the anthrax attacks. Then-Attorney General John Ashcroft publicly identified Hatfill as a "person of interest" in the investigation.

Columnist Nicholas Kristof criticized the FBI's investigation as lackadaisical and initially referred to Hatfill as "Mr. Z." Kristof identified Hatfill by name only after Hatfill held a news conference to denounce rumors.

Marine Cpl. John Wimunc was charged Monday with murder — as well as first-degree arson and conspiracy to commit arson — in the death of 2nd Lt. Holley Wimunc of Iowa.

Her body was found Sunday, three days after a suspicious fire at her Fayetteville apartment.

Authorities also charged Lance Cpl. Kyle Alden with first-degree arson, conspiracy to commit arson and accessory after the fact to first-degree murder. Both Marines were assigned to Camp Lejeune.

The Europa Press news agency said the prosecutors office at the court announced it was backing a case petition brought last month by Brussels-based rights organization Equipo Nizkor on behalf of victims' relatives.

The suspects are John Demjanjuk — an 88-year-old retired auto worker in Ohio — Anton Tittjung, Josias Kumpf and Johann Leprich.

Equipo Nizkor has said the U.S. has been trying for years to deport all four for lying about their Nazi pasts on their immigration papers, but that no country had been willing to take them.

The prosecutors' petition is a nonbinding recommendation. The court's judges will now decide whether to accept the case for study and consider filing charges. A decision could take months.

In a soft voice, she pleaded guilty to one count each of conspiracy, access device fraud, bank fraud and money laundering and two counts of aggravated identity theft. Robreno has scheduled sentencing for Oct. 17.

Kirsch has been in custody for more than a week since deciding to skip house arrest in favor of jail in anticipation of a prison sentence.

Her attorney, Ronald Greenblatt, has said that Kirsch faces a mandatory sentence of at least two years in prison. Kirsch has captivated an international audience since photos of her - looking well-endowed and flirtatious and sometimes in a bikini - circulated on the Internet after her arrest.

Kirsch and her one-time boyfriend, Edward K. Anderton, a University of Pennsylvania graduate, are accused of stealing identification of friends, co-workers and neighbors to get fake ID used to finance a lavish lifestyle. They are accused of stealing more than $116,000 from their victims. Anderton pleaded guilty and is scheduled to be sentenced in September.

The Atlanta office of the Securities and Exchange Commission has filed a lawsuit against wireless software company Mobile Ready Entertainment Corp. and its former CEOs, alleging they ran a "micro-cap pump-and-dump" scheme using false press releases.

The suit claims Michael H. Magolnick and Craig A. Mora sent 16 separate press releases with false revenue projections, made-up contracts for future business and fake new profitable business relationships to boost the price of Alpharetta, Ga.-based Mobile Ready's stock.

In one example from January 2007, a press release from the company claimed the launch of a new text messaging service that would let Mobile Ready business clients market directly to mobile phones through text messaging.

"Mobile Ready subsidiary, Complete Identity has already been working closely with companies in the Direct Selling Association" and "company executives are confident that the industry relationship will yield several million dollars in new business," the release said.

Mobile Ready's (Pink Sheets: MRDY) stock trading volume jumped 300 percent the day after the release, giving Mora and Magolnick a better market in which to sell their restricted shares, the SEC said. But the SEC argues the defendants knew the company had no relationship with the Direct Selling Association and no reason to claim several million collars in new business.

In another release in February 2007, the company said it was projecting $10.1 million in revenue for 2007 and $14.8 million in 2008. The day after that release, the company's stock trading volume skyrocketed 550 percent, while the stock's value rose 57 percent to 11 cents a share.

The suit alleges that as the price of the stock increased following the fraudulent releases, Magolnick and Mora obtained bogus Rule 144 Opinion letters and improperly sold Mobile Ready shares for their personal gain.

Between April and July 2007, Magolnick sold about 2.1 million shares for $69,949. In the same period, Mora sold about 2.2 million shares for $72,589.

Magolnick was co-CEO of the company from December 2006 until his resignation in December 2007. Mora was co-CEO with Magolnick, but is now the company's chairman and CEO.

The SEC complaint wants antifraud injunctions against Mobile Ready, Magolnick and Mora, and registration injunctions, disgorgement, prejudgment interest, and O&D and penny-stock bars against Magolnick and Mora.