Worried that rising panic in financial markets is encouraging naked short sellers and increasing pressure on the remaining investment banks, the Securities and Exchange Commission moved to curb the practice of investors selling stock they don't possess.

The new regulations don't ban short selling, but do require that anyone engaged in the practice to settle their trades within three days. They also expand the ban to all stocks; previously, the S.E.C. had adopted other limits only on investment banks.

The commission also made clear that it is illegal for short sellers to mislead or lie to brokers about whether they have arranged to borrow the shares they use in their trades.

"These several actions today make it crystal clear that the S.E.C. has zero tolerance for abusive naked short selling," commission chairman Christopher Cox said. He described the targeted practices as "unlawful manipulation."

The commission said it imposed the three-day settlement rule because of reports that many short sellers — investors who sell borrowed shares, betting on a price drop before they must repurchase and return the securities — were dragging out settlement of their trades to as long as 10 business days.

That is believed to make it easier to short stocks in greater volume, increasing the pressure on stocks in companies who traders suspect to be in financial trouble. A falling share price can hurt companies' credit ratings by making it appear that it's cost of capital is rising.

In such cases, heavy short selling can become a self-fulfilling prophecy, even for financially sound companies.

The rules, which take effect at 12:01 a.m. Thursday, were welcomed by many.

"This wholesale naked short selling that has occurred has been atrocious," Jon C. Ogg wrote on the blog 24/7 Wall Street. "When you gamble in Las Vegas they make you put your bet on the table rather than yell out numbers to the dealer with no proof you can cover your wager.

"There are exceptions," he added, "but what has been going on lately has to stop."