The investigation covers share transactions in January this year, just ahead of an agreed bid for Anglia Television - of which Lord Archer's wife is a non-executive director - by MAI, Lord Hollick's media conglomerate.
Lord Archer could not be contacted yesterday evening. But it was reported that he told a newspaper: 'It is completely untrue. I did not buy any shares. I am not going to make a statement. That sort of allegation is libellous.'
The department confirmed that Michael Heseltine, President of the Board of Trade, had appointed inspectors on 8 February 'to investigate possible insider dealing contraventions by certain individuals including Lord Archer'. That action had followed a report from the Stock Exchange. When the inspectors' report was received it would be considered in detail before any further action was taken, the department added.
The allegation could not have come at a worse time for the best- selling novelist - who had been canvassed as a possible successor to Sir Norman Fowler as chairman of the Conservative Party - nor for the Government, which appeared finally to have emerged into calmer waters after a string of financial and personal scandals earlier this year.
Although it is thought unlikely that Lord Archer would in fact succeed to Sir Norman's job, his name has also been suggested as a minister at the Department of National Heritage in the forthcoming reshuffle, covering either sport or promoting the national lottery.
Lord Archer, a deputy party chairman under Margaret Thatcher between 1985 and 1986, has made no secret in recent weeks of his desire to regain a mainstream job in politics - and in particular to chair the Conservative Party. He has enjoyed a close friendship with John Major, playing a key role in the Prime Minister's ascent to the party leadership in 1990, when Mr Major's nomination papers were driven in his car from Huntingdon - where the then Chancellor had been recovering from wisdom tooth operation - to London.
He was made a life peer in 1992 when he played a prominent role in the Prime Minister's election campaign. As recently as last weekend, Lord Archer strongly denied reports that he would abandon his extensive work for the party should he not gain a senior appointment in the forthcoming reshuffle.
MAI's agreed bid totalled almost pounds 300m, raising Anglia's share price by 180p. Lord Archer's wife, Mary, founder-chairman of the Lloyd's Hardship Committee established to help 'names' who face potential bankruptcy over their losses on the London insurance market, joined Anglia's board in 1987.
Lord Archer resigned as a Conservative MP for Louth in 1974 after losing more than pounds 270,000 in a Canadian company. He restored his fortunes and paid off his debts with a string of successful novels that started with Not a Penny More, Not a Penny Less. According to the Sunday Times list of the 500 wealthiest people in Britain, Lord Archer ranks 427th with an estimated worth of pounds 25m.Reuse content