disclose risk, said a speaker at a Deloitte & Touche seminar yesterday.

Derivatives are being scrutinised very closely by the US Securities and Exchange Commission, Deloitte & Touche LLP, New York, partner Ms Carol Calhoun said.

"The SEC and Congress reacted strongly to the first losses of 1994,'' she said.

A prospectus is more apt to outline the risks in more detail as opposed to a "laundry list'' of the fund's assets, she said.

Ms Calhoun, speaking yesterday morning at the seminar held at City Hall, showed a list of entities which lost millions after investing in structured notes and mortgage derivatives, among them Piper Jaffray and Askin Securities which lost $700 million and $600 million respectively.

Piper's losses were the result of one trader incorrectly guessing which way interest rates would go, she said.

"By the end of 1994 we saw funds retrenching, coming out of derivatives,'' she said.

Investors must read the prospectus, look at yield versus competing funds and ask the asset manager about the fund to determine the risk level.

If two funds appear very similar yet one is yielding more there is likely hidden risk in the fund with the higher yield, she said.

Three common derivatives are; dual index notes, range notes and ten year constant maturity treasury floaters, she said.

Derivatives are securities which derive there value from another security.

But, said Ms Calhoun, there are differing views on the definition.

Investors, to protect themselves, must also look at the objectives of the fund, she said.

Piper marketed the fund as "conservative'', she said.

Ms Calhoun specialises in the audits of investment companies with complex financial instruments and capital structures.