Short sellers are like Dr. Jekyll and Mr. Hyde: Some exist ethically to uncover business fraud, while many are the fraud, targeting publicly traded companies to tank their stocks for personal gain. In either case, short-selling schemes demand greater scrutiny that chief compliance officers and in-house counsel can no longer afford to ignore.

Jaclyn Jaeger is a freelance contributor to Compliance Week after working for the company for 15 years. She writes on a wide variety of topics, including ethics and compliance, risk management, legal,...