BRITAIN'S Serious Fraud Office (SFO) said yesterday it would investigate allegations of market manipulation in the shares of Eurotunnel plc.

But the SFO, which investigates and prosecutes major financial crimes, said it was doing so on behalf of French police and that there were no grounds for a domestic inquiry.

The announcement followed a report in a Sunday newspaper that French police wanted to raid the head offices of up to nine of Britain's leading banks and financial institutions over allegations of insider dealing in the shares.

"The SFO has agreed to investigate, on behalf of the French authorities, allegations of market manipulation in Eurotunnel shares," SFO spokesman Mr James O'Donoghue said.

The information gathered will be for the French authorities. "We don't have grounds to investigate allegations of market manipulation on a domestic level," the spokesman said.

Asked why the SFO was only assisting in an overseas investigation, and not conducting a domestic one, he said: "The bulk of shareholders in Eurotunnel are French, and most dealings in Eurotunnel have taken place in Paris, rather than in London. 50 it's not surprising that the focus should be over there."

The French concerns are understood to centre on allegations that sensitive commercial information about the financial restructuring of Eurotunnel had been leaked to speculators. The deals under investigation are thought to date back to 1994, the year the Channel tunnel was opened.

A spokeswoman for the London Stock Exchange declined comment on claims its surveillance unit had already carried out an inquiry into the allegations without uncovering any evidence.

The SFO can conduct the investigation under the Criminal Justice Act, which compels production of verbal or documentary information on request to assist overseas investigations.

French police said they were unable to comment on the report. Eurotunnel was unavailable for comment.