Broker Direct's acquisition of Bolton-based Greenhalgh & Gregson has sparked a furious row with brokers claiming it could be seen as a "conflict of interest".

A leading broker, who asked not to be named, slammed the purchase because Broker Direct is backed by the IIB.

"Broker Direct is supported by the IIB, the brokers' friend, to head off direct insurers. But buying brokers is unfair for IIB's paid-up members," he said.

Another source added: "The IIB is supported by funds from its broker members. I wonder how it would feel about it supporting Broker Direct's attempts to buy up firms which it could well be in competition with."

Broker Direct, however, has hit back at the accusation and said it would not rule out further acquisitions.

Terry Stanley, broker services and marketing director for Broker Direct, said: "We bought the entire shareholding for a reason - Broker Direct deals with SME brokers, and Greenhalgh & Gregson is a typical broker that we would deal with."

Stanley added: "We've always prided ourselves on knowing how brokers operate and the only way to go to the next level was to own one. This would help us learn more about our brokers and refine our products and services.

"There is no conflict of interest, the broker will carry on trading as a separate limited company with its own FSA approval. We believe we can open up new markets for it."

Andrew Paddick, director general of the IIB, said that from a strategic perspective, it was very important for Broker Direct "to have the knowledge at the sharp end, as to how the market is operating".

Bryan Whicher, director of Whichers Boyland & James, said with Towergate and other major consolidators on the acquisition trail, Broker Direct could offer a sensible alternative to high street brokers looking to exit the market.

"With the big drive towards consolidation, high-street brokers are perhaps looking for a way out and with Broker Direct, at least they are being bought by friends, or by a business in which they have an interest.

"But if more of the high-street brokers are snapped up by consolidators like Towergate, then who is left to place business with Broker Direct?"

Whicher added: "They [Broker Direct] also need to look after their own interests and there's a duty on the directors of every company to keep them trading."