Peter Young admitted illness days before fund suspended

Peter Young, the Morgan Grenfell fund manager at the centre of allegations of trading irregularities, is said to have told colleagues and company sales staff that he was suffering from stress or an undiagnosed form of psychiatric illness shortly before the scandal broke.

Mr Young spoke to a meeting of fund managers and sales staff in the company's City offices last Saturday, two days before Morgan Grenfell suspended trading in three European unit trusts.

He apparently told his audience that he was retiring immediately because of "ill health", adding that his illness was either a form of stress or some other mental health problem.

The meeting, called at less than a day's notice, followed the launch of an inquiry by Imro, the fund managers' regulator, into the three funds.

It also came in the wake of a decision by Deutsche Bank the previous day to inject substantial sums of money into the unit trusts, by buying back the unlisted securities originally purchased for two of them by Mr Young.

It is understood that the briefing on Saturday was called so that when Morgan Grenfell suspended trading the following Monday, sales staff would be primed to brief financial advisers, whose own clients were inundating both them and the company with calls.

Mr Young's presence was required to reassure the sales team, some of whom had heard rumours of unspecified problems with the European funds, that there was nothing to worry about. In turn, they were to pass this on to callers.

However, one adviser, who would not be named, said yesterday: "When it all broke, no one bothered to contact me. I had to contact them to find out what was happening."