Banca Monte dei Paschi di Siena SpA said Chief Executive Officer Luigi Lovaglio has been notified he is under investigation for alleged market manipulation and obstructing regulators in the bank’s takeover of rival Mediobanca SpA.

Monte Paschi also said it received a search order from Milan prosecutors.

The company is confident in the correctness of its actions and is fully cooperating with authorities, it said in the statement on Thursday, following a media report.

Monte Paschi shares fell as much as 7.1% in Milan trading, and were down 4.1% at 4:35 p.m. local time.

Earlier Thursday Italian daily Il Corriere Della Sera reported Milan prosecutors are investigating Lovaglio and two other individuals — billionaire Francesco Gaetano Caltagirone and Delfin Sarl Chairman Francesco Milleri — for allegedly acting in coordination over a deal that allowed Monte Paschi to seize control of Mediobanca this year, without properly disclosing their alignment to the market.

They are also probing the purchase of a portion of Paschi shares sold at the end of last year by the Italian government, as well as the acquisition of Mediobanca shares in violation of a regulatory obligation to launch a “public purchase offer,” the report said.

The prosecutors also alleged that the agreement regarding the takeover bid for Mediobanca was concealed to regulators including the European Central Bank and the Italian market regulator, according to the newspaper report.

Representatives for Caltagirone and Milleri declined to comment. A representative for the Milan prosecutors also declined to comment.

Monte Paschi completed the €17 billion ($19.7 billion) acquisition of Mediobanca in September, creating Italy’s third-largest lender by assets in a deal backed by the Italian government under Prime Minister Giorgia Meloni. The bank launched the takeover bid in January, about two months after Rome sold a 15% stake in Paschi to a small group of buyers including Caltagirone and the Del Vecchio family. The two investors were also the biggest shareholders in Mediobanca.

Prosecutors in Milan have been examining that sale, people familiar with the matter said previously. They have been looking for possible anomalies in the placement, some of the people have said. The proceedings were triggered by a complaint filed by Mediobanca earlier this year.

Paschi CEO probed for alleged market manipulation in M&A