Certainly Morgan Grenfell's German masters at Deutsche Bank are going to want to exercise much greater hands-on control over their British investment bank than they have to date.The regulators too would be wise to hold their counsel. Now champing at the bit to discipline everyone in sight, they should first be looking to their own houses. That there was a breakdown of internal controls at Morgan Grenfell, we know; but could this not also be a case of regulatory failure, ignored warnings and the like?Despite all this, it is easy to overblow the significance of Mr Young's costly little jolly. Lest it be forgotten, the shenanigans surrounding the Guinness bid for Distillers were little more than 10 years ago, and though the mischief occurred on the corporate finance side of Morgan Grenfell, the story isn't so very different - a star employee given all the lee- way he needed to run riot. If it can happen in one part of Morgan Grenfell Asset Management, then it could also happen elsewhere. Nor should we automatically accept the line that Morgan Grenfell was the hapless victim of a clever and devious manipulator That also is just too convenient an explanation. I'm not suggesting here any question of collusion or conspiracy, that Morgan Grenfell's top brass are making Mr Young into a scapegoat for something they all knew about That would be daft.

But plainly there has been negligence, the scale of which has yet to be established.There are eerie parallels here with Morgan Grenfell's last big scandal, the Guinness affair. Whether he also had his fingers in the till has yet to be established. The fact that Morgan Grenfell has moved to freeze his assets tells you that it is at least suspected.For Michael Dobson, Deutsche Morgan Grenfell's chief executive, to describe this sorry affair as "an isolated incident" is from his point of view, with a damage limitation exercise to confront, wholly understandable But it is also clearly nonsense. When it became apparent that he was breaching his limits, rather than doing what he was told and unwinding the positions, he systematically set about disguising what was going on. How he came to go so seriously off the rails is perhaps a question that only the shrinks can answer fully.

Part of it, however, is undoubtedly our old friend hubris.Mr Young had one of the top-performing funds of 1995; plainly he believed in his investment judgements and the array of unquoted securities he had begun to accumulate. So are the trustees, whose failings appear to have been equally lamentable.Mr Young was a seemingly able, very plausible, and for a time at least, highly successful young fund manager. The controls are not there to be exercised; they are insurance. No one would expect an apparently reliable fund manager to behave like this.

It is hard to exaggerate the air of devastation and disbelief that hangs over the Finsbury Circus offices of Morgan Grenfell Asset Management. To most of the largely decent and highly competent souls who work there, this is not just a bad business, it is a totally incomprehensible one. The failure in control which allowed it to happen is just a part of it. Almost worse is the realisation that someone as apparently volatile, untrustworthy and, it now seems, just plain dishonest as Peter Young could not only have established himself within their midst, but flourished and prospered there. Fund management is first and foremost about integrity and diligence; nothing excuses MGAM's failings but in a way they are explained by the fact that such qualities are accepted as given among those in charge of other people's money. How did he do it? How did he get away with it for so long? These are all questions we are trying to answer. Some highly complex structures were set up to disguise the fact that he had gone against the instructions of his superiors."Mr Young had been ordered to sell down his positions to comply with rules on unquoted securities but did not. Deutsche has acted decisively and swiftly to ensure that investors are not disadvantaged."Mr Young plainly did wrong He misled everyone and breached his position of trust.

"He was devious, smart and clever," Mr Dobson said."The best interpretation that can be put on it is that he believed in his investments and thought he was acting in the best interests of investors by doing this, but even if this is the case he plainly acted in a way which is completely unacceptable."It is understood that Mr Young has not been fired but remains on suspension so that Morgan Grenfell can ensure access to him and his co-operation in continuing investigations.. Why he was not controlled properly within existing structures we are still trying to establish. It's never happened before, we are not used to it, and it will never happen again," he said."However, the implication that it is symptomatic of a wider breakdown in internal controls is not right This was a localised incident on the unit trust side. Peter Young appears to have engaged in a systematic and complex attempt to disguise losses and cover up the fact that he was failing to comply with instructions from superiors to reduce his exposure to unquoted securities, Michael Dobson, chief executive of Deutsche Morgan Grenfell, said yesterday. Mr Dobson also refused to rule out the possibility that he benefited personally from his dealings. Morgan Grenfell has obtained an injunction freezing his assets.