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Copyright 2001 The New York Times Company The New York Times September 28, 2001, Friday, Late Edition - Final SECTION: Section B; Page 4; Column 1; Business/Financial Desk LENGTH: 1026 words HEADLINE: A NATION CHALLENGED: THE MARKETS; Regulators Find No Evidence That Advance Knowledge of Attacks Was Used for Profit BYLINE: By KURT EICHENWALD and EDMUND L. ANDREWS BODY: After almost two weeks of investigation, financial regulators around the world have found no hard evidence that people with advance knowledge of the terrorist attacks in New York and Washington used that information to profit in the international securities markets. And a number of officials are beginning to express doubt that such a plan existed. While the investigations are continuing and additional evidence is still to be reviewed, many leads that initially seemed to indicate a conspiracy to profit from the terrorist attacks have been found to have less sinister explanations. For example, regulators have already traced some of the most suspicious trades in London -- involving what appeared to be huge bets that the stocks of certain large airlines would decline -- to the trading accounts of a smaller airline. That airline, which officials declined to identify, was said to have made the trades as part of a common hedging strategy intended to reduce the financial impact of a downturn in the industry. "We have been through thousands and thousands of trades, and followed up on anything that seemed unusual," said Patrick Humphris , a spokesman for the Financial Service Authority in Britain, which is investigating trades on the London Stock Exchange, the London Futures Exchange and the Petroleum Exchange, as well as direct trades between institutions. "So far, we have found nothing irregular." A law enforcement official, speaking on condition of anonymity, also expressed doubt that a trading conspiracy existed. The official said it was unlikely that a terrorist group that had worked for months, if not years, to orchestrate its attack would be reckless enough to create even a subtle signal of its plans by engaging in the high-profile trading of public securities. Regulatory authorities are also working with the Federal Bureau of Investigation and other law enforcement and intelligence agencies in an attempt to track down financial and brokerage accounts tied to the suspected hijackers of the planes that crashed into the World Trade Center, the Pentagon and in Pennsylvania, as well as to their associates. Someone who knew that the attacks were coming could have profited in a number of ways. One would be to sell stocks short -- borrowing the shares and then selling them, hoping they could be bought back after a price drop. Another would be to buy put options, which give the owner the right to sell at a

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9/24/03