Goldman Sachs yesterday deregistered the trader at the centre of the scandal that has engulfed the bank since the US Securities & Exchange Commission accused it of fraud.
Fabrice Tourre, who is on "paid leave" from his job at the firm's London office, will no longer be able to work in a regulated function as a result.
The move came just hours after the Financial Services Authority formalised its probe into the bank's London branch by launching an enforcement investigation under the Financial Services & Markets Act.
The FSA confirmed that this would centre on the allegations of fraud levelled against the bank by the SEC in the US. Goldman has said that it will "vigorously contest" those charges, which are based on the allegation that Goldman failed to inform investors that a hedge fund helped to select a portfolio of subprime mortgages for a bond that the hedge fund subsequently bet would fail.
The bank last night stressed that Mr Tourre, who was also named in the SEC's filings and faces the same accusation as his employer, remains an employee of Goldman Sachs and is still receiving his salary.
"We are giving him time off to deal with this," a spokeswoman said. "It is not uncommon to deregister someone in these circumstances."
Greg Palm, Goldman's general counsel, said that it was "entirely appropriate" that the FSA should look into the SEC's allegations and said that the company would "give them all the information they want to be totally transparent with them".
Regulators in Germany are also investigating.Reuse content