He seemed to be decked with marine productions and, in particular, with shells whose clattering announced his approach. From this circumstance he derived his name. - Sir Walter Scott
A class of bogle, this freakish spirit is the quintessential bogeyman of Scottish folk legend. It's favorite haunts were rivers and streams, where it would lie in wait for unsuspecting travellers to pass him by. Unlike many mythical beings, the shellycoat was not generally malicious or violent, but rather playful and harmless. He most enjoyed misleading the unsuspecting, causing them to go off course and become lost. It would mimic a cries of a drowning person, luring people to investigate, whereupon he let out a silly laugh and dive beheath the waters.
"Two men, on a very dark night, approaching the banks of the Ettrick, heard a doleful voice from its waves repeatedly exclaim, "Lost! Lost!" They followed the sound, which seemed to be the voice of a drowning person, and, to their infinite astonishment, they found that it ascended the river. Still they continued, during a long and tempestuous night, to follow the cry of the malicious sprite; and arriving, before morning’s dawn, at the very sources of the river, the voice was now heard descending the opposite side of the mountain in which they arise. The fatigued and deluded travellers now relinquished the pursuit, and had no sooner done so than they heard Shellycoat applauding, in loud bursts of laughter, his successful roguery." - old Scottish folk tale
The shellycoat has given his name to many points on the coast of Scotland. Supposedly, he was particularly fond of the area around the river Hermitage, in Liddesdale.
Selected sources:
http://members.dencity.com/MythicalCreatures/
http://www.electricscotland.com/
http://www.heart7.net/spirit/
http://www.pantheon.org/