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Indeed, the sheer amount of information, and the sheer variety of means to transmit it, has become overwhelming. In the late '90s, Arthur Levitt's SEC tried to clean up bulletin board manipulation in the then-early Web. It came off appearing earnest, if hapless. It followed that up with Reg FD, a massive attempt to define what public companies could and could not do in the dissemination of information to shareholders. This came off as mildly ridiculous. A few years back, Jim Cramer offered his rambling description of how hedge funds can talk stocks up and down. The world was thunderstruck, the SEC silent. And undoubtedly the height of folly (or the depth) was attained during the post-Lehman Brothers Holdings Inc. panic last year, when the SEC launched its anti-rumor probe, which was then broadened to curbs on short sellers. We never heard again about rumormongering, and most sane views of the anti-shorting campaign suggest that it was shortsighted, demagogic and generally useless. But the informational cat is so far out of the bag by now that it's ridiculous. Evidence of this continues to pile up. In the past week or so, Dutch regulators had to step in to save a local bank after a tweet provoked a run. And Wednesday's Financial Times reports on a study from New York University's Stern School of Business that one out of five hedge fund managers misrepresented facts about their funds to investors. Hedge funds, of course, have long resisted any oversight at all. This report will obviously undermine that argument -- as it probably should. Fibbing about basic facts like performance or assets under management involves basic dishonesty, and is one slippery step from Bernie Madoff. Nonetheless, it also illuminates very clearly the problems that exist in regulating complex, highly speculative, extremely short-term markets and goes well beyond simple protection of investors to the difficulties of monitoring markets for systemic risk. Cramer, in fact, spoke the truth about the ease of talking stocks up and down. It happens all the time; it occurs so regularly that many practitioners undoubtedly view the casual passing of obvious half-truths (which so easily morph into non-obvious lies) as akin to a bluff or a feint. Caveat emptor. Markets are clearing mechanisms for establishing valuations, for separating true from false, good from bad, at least economically speaking; but that clearing mechanism requires time. In the most speculative, shortest-term markets, there is a ton of data at every moment, but few self-evident truths. Rumors loom large because they move prices before anyone has the time to verify or discredit them. Everything is a shadow. There are no facts -- confirmed knowledge -- only opinions. And often enough, these opinions form patterns: conspiracies, plots, schemes. The tendency of short-term traders toward paranoia was a subject aired recently in the blogosphere after New York Magazine's story on the conspiracy-minded Zero Hedge site. Obviously, this is the world many hedge funds operate in. This is not an excuse for their failure to tell the truth. It is, however, a warning about the difficulties of trying to sift truth from nontruth in this arena. The fact is finance over the past decades has grown increasingly short term, for all the adulation paid to Warren Buffett. The foundational disclosure regimen of the SEC would remain perfectly adequate, even with the proliferation of communication channels, if everyone were a long-term investor. But that's not the case. Instead, technology has increasingly taken us toward ever-more short-term trading -- flash trading -- and toward highly liquid and efficient if opaque venues -- so-called dark pools. What do regulators do? Trying to clamp down on opinions, bluffs, half-truths, rumors, unverifiable scuttlebutt is hopeless; it's too indefinable and too ubiquitous. Trying to restrict extremely short-term trading might help in theory, but there seems to be no political will to do that, except by limiting flash trading or harassing dark pools; and these initiatives are justified not on the altar of transparency, but on creating a more level playing field, that is, political considerations. What's necessary here, though there are no signs of it happening, is for the SEC in particular to take a more holistic view of information in the markets and draw some lines: This we care about, this we don't; here's where caveat emptor will reign. But at the end of the day, regulators will continue to struggle with these issues -- and continue to fail. The real problem is that the political nation -- the world beyond Wall Street that's not engaged in day trading -- believes in truth and honesty as straightforward concepts. They believe that markets should involve transactions as honest as getting correct change from a checkout person. They believe in fact and error. Opinions should have some relation to eventual reality. There should be no shadows. Regulators know full well the truth that, in much of the market, there is no truth. But they can't really admit it, or take steps to clarify the problem. And so the rock will get shoved up the hill again and again and we will be shocked again and again. - Robert Teitelman Robert Teitelman is the editor in chief of The Deal.
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In the roll call of Sisyphean tasks, none must be greater than the attempt by regulators to sanitize the monumental flows of information that cascade through the markets every day. Accurate and transparent disclosure was the very heart of the newly formed Securities and Exchange Commission in the 1930s. And the SEC has intermittently sought to ferret out and prosecute that great crowd pleaser of market sins, insider trading, despite manifold complexities and difficulties. The genius of Eliot Spitzer was to recognize that research opinions could be prosecuted in a similar crowd-pleasing way, though he never figured out (or really tried) how to solve the underlying problem of analysis under conditions of uncertainty. 
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I think this is a corporate governance issue. Issuers are responsible for setting investor expectations and having the integrity to stick to their promises - whatever it takes (without excuses).
Market manipulators, such as hedge funds, need to be neutralized by disciplined actions of the issuers themselves. The issuer's board of directors can play a critical role in managing expectations and creating a corporate environment that is resilient to the cross winds of market manipulations.
Imagine the corporate governance function as being analogous to a ocean-crossing freighter. The bigger the ship and size of its cargo the more difficult it is to change its course (intentionally or not). Good corporate governance systems and practices should furnish the issuer with sufficient ballast to stay on course and enough foresight to change course as needed.
I believe it's time to expand the role of governance committees to step up to this challenge. Regulators may want to consider how to engage governance committees appropriately.