The Government has given the Securities and Futures Commission until the end of the month to decide what action should be taken over the failure of Peregrine Investments Holdings. Sources said the commission could decide to recommend the matter be referred directly to police if it believed criminality was involved. It could also recommend an independent post-mortem investigation be conducted similar to the probe of the Allied Group in the early 1990s, which cost the Government $46 million. The Peregrine group collapsed in January under the weight of losses at its fixed-income division and over-exposure to the Indonesian rupiah. Under Section 143 of the companies ordinance, Financial Secretary Donald Tsang Yam-kuen has the final say on how the matter will be dealt with, but sources said he would rely heavily on the advice of the watchdog. An SFC spokesman declined to confirm whether Peregrine was being investigated. However, under Section 29a of the regulator's ordinance, the commission has the power to conduct a preliminary inspection of the finance house's books. Sources said that SFC executive director in charge of enforcement Mark Dickens had yet to decide what was the most appropriate direction to take in the case. A post-mortem report, which probably would be compiled by an independent team of accountants and financial specialists led by a top legal counsel, would be costly and take at least a year. Given Peregrine's former size, the SFC would be incapable of conducting a thorough investigation itself. 'Peregrine was a huge company and had tonnes of things going on, and, if anyone goes in, they have to reconstruct a fair bit of that,' one source said. 'OK, there are documents and computer records, but there are not the thousands of people any more that used to administer them,' the source said. The SFC's preliminary investigation of Peregrine's accounts was delayed while liquidators Price Waterhouse sought to sell off as many assets of the failed group as possible. The source said a key SFC focus was whether Peregrine had kept the market adequately informed about its financial health in the lead-up to its collapse. In October, Peregrine took out full-page newspaper advertisements denying rumours about its imminent demise. It said rumours of trading losses worth hundreds of millions of US dollars were 'completely false'. The SFC is understood to have conducted an examination of Peregrine's accounts about the time of the publication of the advertisements.