KB Home, the fourth-largest US housebuilder, on Friday revealed that US regulators had opend a formal investigation into the stock-options backdating practices that led to the departure of its chief executive last November.

The Los Angeles-based group is one of the largest companies to be ensnared in the unfolding options scandal, and the launch of a formal probe by the Securities and Exchange Commission comes as management wrestles with the impact of the slowing housing market.