share prices gyrating on the New York market, the SEC said it had acted against "one of the most pervasive insider trading rings since the days of Ivan Boesky and Dennis Levine", both jailed for manipulating the markets in the 1980s.

The roll call of New York's financial elite facing potential 25-year prison terms if found guilty included hedge fund executives and a husband and wife, both elite lawyers in Manhattan.

Linda Chatman Thomsen, director of the SEC's enforcement division, said in a statement: "What is so alarming about the conduct alleged in the SEC's case isn't just the scope of the scheme ... but, sadly, who is at the centre of it."

Besides the lawyers, she said, defendants including registered representatives, compliance personnel and hedge fund managers improperly relied on hundreds of tips during five years of illegal trading. "And this conduct ... [occurred] at what are commonly considered 'top tier' Wall Street firms," she said.

Michael Garcia, the US attorney for New York, said Wall Street professionals repeatedly traded on secrets revealed to them by insiders at UBS and Morgan Stanley to net more than $15m (£7.6m).

Mitchel Guttenberg, an executive director and institutional client manager at UBS, is accused of accepting hundreds of thousands of dollars as he sold non-public information to two men regarding forthcoming upgrades and downgrades in UBS analysts' securities recommendations.

The men, David Tavdy and Erik Franklin, allegedly used the inside information to each earn more than $4m in profitable share deals through various brokerage accounts they controlled, Mr Garcia said.

The lawyers, Randi Collotta, who worked for Morgan Stanley in Manhattan, and her husband, Christopher Collotta, who worked in a private practice, were also among those charged.

Prosecutors said Ms Collotta was an associate in Morgan Stanley's global compliance division when she passed inside stock tips to her husband, who gave it to others, resulting in illegal profits of hundreds of thousands of dollars between 2004 and 2005. After others made money from the tips, they paid Mr Collotta a portion of their profits, the indictment said.

The charges came as renewed fears of recession in the US triggered an early 200-point fall in the Dow Jones industrial average. A better than expected survey of the US manufacturing sector helped dispel some of the gloom created by the second set of downbeat comments this week from Alan Greenspan, chairman of the Federal Reserve until last year. Despite recouping most of the losses by lunchtime, Wall Street remained jittery ahead of the release of the letter from the veteran investor Warren Buffett to shareholders in Berkshire Hathaway, due after the close of business in New York.

In London, the FTSE 100 index at one stage looked to be on course for its third three-figure decline in a row but pared its losses as nerves steadied on Wall Street to close 55.5 points down at 6116.0.

The International Monetary Fund said yesterday that this week's fall in global stock markets was a correction and not a fundamental shift in market direction. A spokesman, Masood Ahmed, said the fund did not see Tuesday's tumble in stock prices, which wiped 9% off the value of China's stock exchange and led to a 400-point fall in the Dow, as triggered by a single event. "Risk appraisals can change very quickly," he said.