The Securities and Exchange Commission of the US has launched its own investigation into allegations that UK-listed hedge fund giant, Man Gr...

The Securities and Exchange Commission of the US has launched its own investigation into allegations that UK-listed hedge fund giant, Man Group, helped to hide losses of $175 million from investors in a Cayman Islands-registered hedge fund.

The SEC is thought to have begun its inquiry within the past week into the collapse of Philadelphia Alternative Asset Management, a hedge fund which was a client of Man Financial, Man's execution business. Investors have begun behind-the-scenes discussions to determine whether to launch multi-million pound claims for compensation against Man.

Allegations made by the funds’ receiver involve the opening and operation of an unauthorised bank account for Paul Eustace, manager of the PAAM funds, through which losing commodity markets trades were sidelined.

According to the receiver, Man Financial kept this account secret from investors and the fund's administrator, UBS, even when losses reached $175 million. In a statement, Man said: "We have an excellent record of regulatory engagement and compliance, and will cooperate fully with the SEC in connection with this review."

Last week Man suspended Thomas Gilmartin, a senior broker in its New York office who was named by the receiver as a "main contact" for Mr Eustace. It also ordered its compliance department to conduct an internal investigation although it stated that: "There are a number of areas where we do not agree with the receiver's interpretation of information obtained during his investigation."

The UK regulator, the Financial Services Authority, has so far declined to comment on the allegations against Man, a FTSE 100 company.

Legal action in the affair was launched by an investigation in June by the US Commodities Futures Trading Commission and has so far been confined to charges of fraud against Mr Eustace and PAAM.

Although Man has not been charged with any offence, investors are discussing the possibility of litigation against the company. Stanley Pantowich, a founder of $4 billion New York money manager TAG Associates, which invested in PAAM, told Bloomberg last week: "Either they [Man Financial] were complicit or stupid, and in either case they should owe the investors."