Amvescap denies it is Spitzer target

Amvescap attempted to shore up its reputation yesterday by issuing a denial that Eliot Spitzer, New York's high-profile investigator of Wall Street murky practices, had threatened legal proceedings against the giant Anglo-American fund manager.

The company's statement that it had "received no notice" from the office of Mr Spitzer, New York's attorney general, failed to reassure the market. Amvescap's shares fell 3 per cent to 406.5p yesterday, having declined from 443.5p last week, when speculation about impending legal action first emerged.

Amvescap saidInvesco, the arm of the business Mr Spitzer is thought to be focusing on, was "co-operating fully with the regulators' review of the mutual fund industry".

It added: "We are also conducting our own internal reviews of these issues and continue to believe that the actions taken by our funds have been consistent at all times with the best interests of our shareholders."

Mr Spitzer, who forced America's largest investment banks to hand over $1.4bn (£836m) to settle charges of market abuse, is now targeting fund managers.

He is investigating whether ordinary investors have been disadvantaged by a short-term trading practice known as market timing.

Market timers, often hedge funds, rapidly trade in and out of mutual funds to take advantage of inefficiencies in how funds are priced. This raises costs and cuts investment returns.