Gartmore prepares for lengthy FSA investigation into Rambourg

The Financial Services Authority (FSA) is to launch an investigation into the conduct of star Gartmore European fund manager Guillaume Rambourg, which the group privately acknowledges could take some months to complete.

Gartmore has conducted its own investigation into the manager - who was suspended from the firm for much of April - using external law firm Clifford Chance which concluded that while Rambourg breached internal rules by directing traders to favour specific brokers there was no ulterior motive and no outright breach of regulations.

It reinstated him as an unapproved person at the end of April and said it was applying to the FSA to agree him as an approved person again within six months. However, this morning chief executive Jeff Meyer said this will now be delayed until after the FSA investigation is complete.

However, the regulator has now insisted that it is to formally investigate the matter itself. While the outcome was always acknowledged as a possibility by the group the market had apparently not fully priced it into the group's shares which fell by some 4.3% in early trading, some 5.3p to 11.8.5p.

However, the news that Rambourg, who is responsible alongside Roger Guy for a large portion of the firm's assets, was returning sent the share price rocketing a month ago and the group may take some solace that more of that rise has not been given back this morning.

Yet sources close to the group privately acknowledge there is a real risk that Rambourg will not be reinstated as an approved person in the current heated political climate. However, senior figures have stressed that it remains very confident Rambourg - who in the past year has also been fined by the Italian regulator over insider dealing - has not been involved in any formal regulatory breaches. It stressed that it would not have reinstated him even as an unapproved person had there been any doubt.

Nontheless, in a conference call this morning Meyer stopped well short of giving Rambourg his full backing. He said: 'The FSA principles on approved persons is fairly broad. They are the regulators and how they apply it is more their jurisdiction than mine.

'There are a range of options that are possible.Given the range of options it would be premature to speculate [on the outcome].'

From this morning the group has once again agreed to waive the 30-day notice period that normally applies on redemption requests into Rambourg and Guy's flagship AlphaGen Capella hedge fund and their other vehicles. Investors did punish the group following the previous announcement with outflows amounting to £1.2 billion in the six weeks following the news. However, much of this was offset by strength in other areas of the business.

Rambourg is currently one of a number of analysts working on the European large cap team, supporting managers Roger Guy and new hire Darrell O'Dea.

The FSA said it is only investigating Rambourg, and not Gartmore or any other individuals. Gartmore said it would not be making any further statements until the FSA's investigation is completed.