The Irish Financial Services Regulatory Authority has ordered a Dublin company that manages three hedge funds on the Irish Stock Exchange with assets of some €15 million to withdraw from the investment business.

The financial regulator's direction on Broadstone Fund Management Ltd to cease trading is believed to be the first such cessation order on an Irish-domiciled fund manager. The rapid expansion of the funds industry has seen the money held in Irish-domiciled funds grow to more than €500 billion in the past year.

Broadstone Fund Management is a subsidiary of Broadstone Capital Group Ltd, of 11 Mespil Road in Dublin 4.

The company was directed to cease all investment and investment advice services from 5pm yesterday after the regulator uncovered serious regulatory issues in its affairs.

"The reasons for the direction are not related to the integrity of client money or assets," said a spokesman for the regulator. He declined to specify the nature of the regulator's issues with the company.

Only five minutes before this direction came into force, the regulator lifted a similar order on another Broadstone group subsidiary immediately after it was sold to its management.

Harvest Global Asset Management Ltd, which manages €150 million in pension and investment funds, remains in business following the sale of the company to its its managing director David Holmes and its founder Mervin Harris.

This company manages funds for Irish Life, a division of Irish Life & Permanent, and New Ireland, the Bank of Ireland subsidiary. It takes investment advice from Merrill Lynch.

Stock exchange chief executive Tom Healy said last night that the exchange had not heard of the direction against Broadstone Fund Management. "As far as I know, we haven't been informed of this yet," he said.

Broadstone Fund Management has three hedge funds on the exchange: Avenir, Mespil, and 4XiM CMP. On foot of queries last night from The Irish Times, the status of these funds will be reviewed this morning by the exchange.

Broadstone founder and chief investment officer Gerry O'Neill said last night that the regulator's scrutiny of its affairs arose from "an investment into the company that was not realised" late last year. He declined to elaborate.

"The funds are not exposed because they are 100 per cent in cash," said Mr O'Neill, a former head of fixed interest rate trading at ABN Amro in Dublin.

"The board is in ongoing discussion with our clients regarding what we do with those funds. Subsequent to these discussions, the board will be making a decision."

The transfer of ownership of Harvest Global Asset Management was sactioned by the regulator at 4.55 pm, the same time as it lifted a cessation direction against the company which was to come into force at 5 pm.

About an hour before that, a spokesman for the regulator said both companies had been "directed to cease investment business services and investment business advice". He said later in the evening that the "firm has been acquired and we have lifted the direction". Broadstone's sale of Harvest Global Asset Management came two years after the group acquired the operation from its founder, Mr Harris, who will assume the role of chairman in the company.

Mr Holmes, the managing director, said the direction served against the company arose from a "group-instigated technical breach" of regulations under the Investment Intermediaries Act. He declined to be more specific on the nature of the breaches.

"From Harvest's point of view, it's business as usual," he said. "There was never an issue regarding the integrity of client funds or investments."

To acquire Harvest from Broadstone, he and Mr Harris paid a "nominal sum" to the group and assumed in excess of €400,000 in debt.

It is understood that the company had a potential valuation of €4.5-€6 million when it was acquired in March 2004 by Broadstone.

That valuation depended on performance clauses around shares in the Broadstone group, which were never realised.

A spokesman for New Ireland said: "There is a good track record in this business and we are happy to support this business."