The chairman of UK supermarket chain, Iceland, has returned from holiday to answer questions over his controversial £13.5m sale of shares just before Christmas.

Malcolm Walker denied he was preparing to quit the frozen food chain. An Iceland spokesman said: "As far as Malcolm is concerned he has obeyed all the rules. He informed the board of his decision to sell his shares. He has done nothing wrong. We expect him to stay on."

Institutional investors are reported to have requested urgent meetings with the company for an explanation of events that led to the sale of £4m shares at 339p on December 20, several weeks before Iceland announced disappointing financial results. The stock price for shares has been as low as 200p since results were announced.

The Financial Services Authority, which is investigating the circumstances of the deal, routinely looks at cases in which director's share sales are followed by a sharp share price fall.

Iceland's spokesman said the company was unaware that its Christmas performance had been disappointing until the week of January 15, just days before its trading statement. The board had also cleared Mr Walker's transaction in December.

Mr Walker may step back to a non-executive role earlier than anticipated. He was expected to scale down his job in March, but the timing of his move will be discussed at a board meeting early this week.

Last week, Iceland blamed poor sales on its foray into the exclusive realm of organic foodstuffs. The prospects for the company may not improve when Iceland publishes an update on its merger with the Booker Cash & Carry business on Wednesday. Sources say Wednesday could reveal that the company is struggling to meet its target of making £20m cost savings by March, and a further £30m by spring 2002.