Dresdner Probed Over Cyprotex

Employees from the investment bank are likely to be quizzed by the FSA in the aftermath of the uproar over the controversial flotation.

It all began when Paul Davidson, the main Cyprotex shareholder, made a bet with spread-betting firm City Index that the share price would rise post float. City Index hedged their exposure by entering into an arrangement with Dresdner. The bank promptly went into the market and snapped up four-fifths of Cyprotex's available shares. The share price rose and Davidson won £6m.

There is no suggestion of wrong-doing by members of staff at Dresdner or City Index. The transactions, however, are unusual and the FSA will be looking closely as to whether it needs to tighen regulations that appear to have allowed all parties to act within the law. The ethics of the transactions are, however, perhaps another matter.