The Deutsche Bank executive arrested on Tuesday in connection with an insider dealing investigation was one of a team of bankers advising the government on managing its stakes in Royal Bank of Scotland and Lloyds Banking Group, the Financial Times has learnt.

The Deutsche unit, which is being led by Anshu Jain, co-head of the German bank’s investment banking operations, comprises more than a dozen bankers looking at strategic options for the part-nationalised lenders, according to people familiar with the set-up.

The executive, Martyn Dodgson, who was recently promoted to be a managing director at Deutsche, was part of the government advisory team.

The Financial Services Authority on Wednesday said it had arrested a seventh man in connection with the investigation, which the market regulator called the UK’s biggest insider dealing case.

The FSA has refused to confirm the identities of those involved, but the FT has learnt that, in addition to Mr Dodgson, the suspects include: Clive Roberts, head of equities trading at Exane BNP Paribas; Julian Rifat, an equity execution trader at Moore Capital, one of the world’s largest hedge funds; Graeme Shelley, a trader at Novum Securities, the stockbroker; Iraj Parvizi, a director at Aria Capital; and Ben Anderson, whose employment could not be verified.

None of those arrested has been charged, and all are expected to be released on bail after questioning, the FSA said.

More than 140 officers carried out dawn raids on 16 addresses across London and the south-east on Tuesday after a near three-year investigation.

The FT has since learnt that some of the figures embroiled in the probe rank among the City’s best-connected and most colourful characters.

London’s hedge fund community is still reeling from news of the arrest of Mr Roberts, a former senior executive at RBS, who counts some of the City’s biggest hedge funds as clients.

Nicknamed “Del Boy”, former colleagues described him as a “larger than life” figure with a “wicked sense of humour”.

Mr Dodgson is also a high-profile figure in the world of corporate broking, having worked at five separate banks over the past decade, including Lehman Brothers, UBS and Morgan Stanley.

One former colleague described him as “a man in a hurry”, who had built up a substantial buy-to-let property empire stretching to many dozens of homes as a sideline to his career in banking.

Mr Parvizi is a speculator in small-cap stocks who has taken big stakes in companies including Gold Oil, Minerva and Futuragene in recent years.

None of those arrested could be reached for comment.

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