Morgan Grenfell, the British investment bank at the centre of a multi-million dollar scandal, is expected to be investigated by Britain's Serious Fraud Office (SFO) for the misuse of its clients' money. The move is understood to have been prompted by the refusal of Peter Young, the fund manager at the centre of the affair, to co-operate fully with Morgan Grenfell's internal investigation. Last night it was disclosed Mr Young had been dismissed for 'gross misconduct', having been suspended for the previous two weeks. It is understood Morgan's preliminary investigation will be completed in four to six weeks, but the inability of the company and accountants from Ernst and Young to obtain more information has led the bank to conclude that a more serious financial crime may have been committed. Sources said it was likely the SFO would enter the fray next week, although Morgan Grenfell said it had not referred the case to the SFO. The SFO would not comment on whether the case had been referred to it, but said a referral could come from Britain's Investment Management Organisation (Imro) or the police. At the start of the investigation it was established that at one stage 35 per cent of two funds, worth GBP1.2 billion (about HK$14.46 billion), was invested in highly illiquid, unquoted stocks, in breach of Imro regulations. According to Imro, no more than 10 per cent of any fund should be invested in unquoted stocks. The involvement of the SFO will take the investigation to a much higher level, implying that a serious financial fraud has been committed. The whole affair has caused a shake-up in the industry. Yesterday Imro dropped accountants Deloitte Touche Tohmatsu from its team of investigators in favour of Arthur Andersen after discovering a 'potential conflict of interest'. Imro said it also had launched a further investigation into 100 other unit trusts, or mutual funds, which were known to be holding a portion of unquoted stocks. Morgan Grenfell is owned by Deutsche Bank, which has injected GBP180 million to support the funds affected by the scandal.