The FMA is conducting an investigation into the high-profile fund manager.

Milford said the investigation concerns an individual trader employed by the firm and certain specific trades.

It is believed to have started in the middle of last year and covers trading just over a year ago.

The FMA won’t comment on the investigation but the NZX has confirmed there are allegations of market manipulation.

It is reported that the FMA has asked two major stockbroking firms and Milford for more records, including emails and text messages. That will indicate how much the brokers knew about what was happening.

But sources say there are problems with brokers’ record keeping, possibly driven by privacy concerns. This is causing a hold-up in the progress of the investigation.

Sources say Milford primarily used two broking firms as well as a system known as Direct Market Access to place trading orders straight into the market.

To look at the trading of an individual in small caps they will need to look at the broker trades and DMA trades and piece it together. But sources said the FMA is having trouble compiling that data.

Gavin Austin, of ABC compliance, who used to work for the FMA, said there should be no problem for the FMA accessing data from brokers. “If they want to, they can go in and suck all the data out of the hard drives.”

Law firm Bell Gully said: "In the case of market manipulation, the FMA expects brokers to keep clear records of client instructions so that these may be referred to the FMA or NZX where there is suspected market manipulation. It is up to the broker when executing a trade to consider whether the purpose of the order is genuine or manipulative."