SFO steps into funds investigation

 

BRITAIN'S Serious Fraud Office said yesterday it had become involved in an investigation into alleged irregularities at Morgan Grenfell Asset Management (MGAM), the funds arm of Deutsche Bank's British based investment bank.

A spokeswoman for the SFO said the office was in contact with British investment watchdog IMRO, which would share any relevant material with the office. The SFO investigates and prosecutes major financial crimes in the City of London.

IMRO's own investigation into MGAM has already led to the suspension of two fund managers and briefly saw trading halted in three MGAM funds, which have around 90,000 small investors. The largest of these funds is registered and listed on the Irish Stock Exchange.

Trading in the three funds resumed yesterday after a £180 million sterling bail out by parent company Deutsche Bank.

Sources in both the British banking and fund management industries said the investigation appeared to be focusing on links between suspended MGAM fund manager Mr Peter Young and a British based broker, Fiba Nordic Securities. Mr Young was not immediately available for comment.

A spokesman for Fiba Nordic Securities in London said the firm welcomed any investigation and denied any improper relationship with MGAM.

Fiba Nordic Securities has been a broker and valuer for funds managed by MGAM.

Mr Young, whose own assets were frozen as a result of a High Court injunction late on Wednesday, was suspended from MGAM on Monday. MGAM announced on Wednesday evening that a second manager, Mr Stewart Armer, had also been suspended.

Mr Young had managed two of the three suspended funds.

MGAM said Mr Armer was suspended on Wednesday evening "following the discovery of a suspected breach of personal account dealing rules".

A source close to the investigation said Mr Armer's assets would not be frozen and he was not a central focus of the investigation. Mr Armer was not available for comment.

But in Frankfurt a spokesman for Deutsche Bank said neither Mr Young nor Mr Armer had committed an obvious breach of regulations. "But both were hovering on the brink of a grey area," spokesman Mr Detlev Rahmsdorf said.

According to sources close to the investigation, it is trying to determine whether the fund's investments in unquoted stocks were valued above their real worth. British brokers said they had had few redemptions in the three Morgan Grenfell funds after trading in them resumed but the full extent of any exodus would only become apparent after a few weeks.

However, banking analysts in Frankfurt said Deutsche had to tighten up internal controls to prevent a repeat crisis at its British fund management division.

The fall out from the MGAM investigation also spread to Sweden, where Mr Young had invested substantially in unlisted stocks. Stocks held in his portfolio fell amid concerns from Swedish officials about the impact of the inquiry on the country's alternative stock market.