The Financial Services Authority is probing public sector outsourcing contractor Connaught, after a director sold shares in the firm before a profit warning last month.
Peter Jones, managing director of Connaught's northern business, made £264,953 by selling shares on 21 May and 23 June, just ahead of a announcement by the group of a shortfall in its revenue. He has since been suspended pending an investigation.
Connaught confirmed that it had received requests for information from the FSA, though the City watchdog has not yet launched a formal investigation of the firm.
It's the latest in a series of blows to affect Connaught, which yesterday made an urgent cash call to its lenders, after admitting it would break its banking covenants due to mounting debts.
The news caused a further two-thirds to be wiped off the group's share price, which has now lost 90% of its value since June's profit warning.
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