The report by the Government Accountability Office, Congress' investigative arm, found that without "timely and clear" guidance, the SEC cannot ensure that the rules are consistently applied and unintended consequences are avoided.

The SEC last September adopted emergency measures aimed at imposing protections against abusive "naked" short-selling.

Short-sellers bet against a stock. The practice, which is legal and widely used on Wall Street, involves borrowing a company's shares, selling them, and then buying them when the stock falls and returning them to the lender. The short-seller pockets the difference in price.

So-called naked short-selling occurs when sellers don't even borrow the shares before selling them, and then look to cover positions immediately after the sale. Selling a stock short without borrowing the shares needed to settle the trade within the customary three-day period can result in what is called a failure to deliver and can be used to drive down the stock price.

The SEC measures taken last fall included a requirement that short-sellers must borrow shares before making the sale for certain stocks.

The GAO report on naked short-selling and failures to deliver comes as the SEC is considering several new approaches to reining in rushes of regular short-selling that also can cause dramatic plunges in stock prices.

One option the agency has advanced is restoring a Depression-era rule that prohibits short-sellers from making their trades until a stock ticks at least one penny above its previous trading price. The goal of the so-called uptick rule is to prevent selling sprees that feed upon themselves - actions that battered the stocks of banks and other companies over the last year.

Another approach would ban short-selling for the rest of the trading session in a stock that declines by 10 percent or more.

The five SEC commissioners, who voted unanimously in April to put forward five alternative short-selling plans, could settle on one and formally approve it sometime this summer.

For naked short-selling, the GAO auditors cited the positions of some securities industry officials that the SEC's order last fall brought unintended negative consequences, such as wilder price swings and turbulence in the market.

"Naked short-selling enables unscrupulous traders to manipulate the stock market and can directly damage U.S. companies and the shareholders who own them," Sen. Carl Levin, D-Mich., chairman of an investigative panel of the Senate Homeland Security and Governmental Affairs Committee, said in a statement Wednesday. "The SEC should consider and implement an arsenal of weapons to combat abusive short-selling."

The GAO examination was requested by Levin, Sen. Charles Grassley, R-Iowa, and Sen. Arlen Specter, D-Pa.

Separately Wednesday, SEC Chairman Mary Schapiro announced the establishment of a new advisory committee to gather views from parties outside the traditional power corridors of Wall Street and Washington. It is one of a number of measures Schapiro has been taking to strengthen the agency at a time when it has been called on to help restore investor confidence shattered by the worst financial crisis in more than 70 years.

SEC Commissioner Luis Aguilar will be the "primary sponsor" of the new Investor Advisory Committee, which will advise the agency on regulatory issues, financial disclosure, trading strategies and fees. Its co-chairs will be Richard (Mac) Hisey, the president of AARP Financial Inc. and AARP Funds, and Hye-Won Choi, senior vice president and head of corporate governance for TIAA-CREF, the big teachers' retirement investment fund.