A leading US law firm has called on the Securities and Exchange Commission to take much stronger action against abusive short-selling, warning of an increase in rumour-mongering and bear raids amid a sharp increase in short-selling.

Wachtell, Lipton, Rosen & Katz, an adviser on mergers and acquisitions, said short-selling was at record levels and the SEC needed urgently to reinstate the 70-year-old "uptick rule" - which was lifted only last year - to dampen volatility and halt manipulative practices in what were "extraordinary" times.