The head of regulation at the New York Stock Exchange (NYSE), Richard Ketchum, has said that he was concerned about current short selling practices at NYSE's annual conference.
Short selling or 'shorting' stock is when traders try and profit from the declining price of a security by selling borrowed stock and then buying the stock back at a lower price to reimburse the lender.
Ketchum said to reporters outside the conference that they were seeing instances of traders selling short before an offering and then using covering offering stock from someone who is participating in the short sell.
It is against the law to use someone who is participating in the offering as it involves secondary offerings in the deal not public offerings.
The relevant authorities have yet to conclude that they will go ahead with legal action and are looking to investigate more before they come to their decision.
Susan Merrill, NYSE Regulation's head of enforcement, speaking to Reuters, said: "The next step for us is to determine whether we go forward with enforcement action."
"In some cases, we don't have jurisdiction over the customer who was shorting but we do have jurisdiction over the broker-dealer."