Nortel sells telecoms equipment in 150 countries

A Nortel spokeswoman declined to give further details, saying only that the firm was co-operating fully.

Nortel said in October 2003 it might need to revise its 2003 accounts.

Last month, Nortel said its chief finance officer Douglas Beatty and controller Michael Gollogly were on paid leave pending the audit review.

It also said that further revisions to previous years accounts might be necessary.

Inquiry

News that the SEC has decided to turn its informal inquiry into Nortel into a formal investigation knocked 5% off Nortel's shares on the Toronto stock market.

The shares also fell in New York, where they were among the most actively traded of the day.

"It would be irresponsible to speculate on the SEC activities," said Nortel spokeswoman Tin Warren, declining to give details of what the SEC wants to know.

She said Nortel had been co-operating with the SEC since October "and will continue to do so in order to bring the enquiry to a conclusion as promptly as possible".