By Dominique Vidalon and Matthieu Protard
PARIS (Reuters) - France's AMF stock market watchdog is in the midst of a formal investigation into criticism made by U.S. research firm Muddy Waters against French retailer Casino <CASP.PA> which should last a few more months, said a source close to the matter.
"The probe has been under way since the start of the year. The AMF is conducting in-depth investigations on a complex matter. It implies checking the communication of the two protagonists in the case and assessing whether there has been a violation or not," the source told Reuters on Wednesday.
Officials at Muddy Waters could not be immediately reached for comment.
In December 2015, Muddy Waters criticized Casino's accounting practices, saying the supermarket retailer was "dangerously leveraged" and managed for the short-term, prompting the worst slide in seven years in Casino's stock price.
Muddy Waters said at the time that it was "short" on Casino's shares and credit, namely betting on falls in both assets.
Casino has rejected Muddy Waters' criticism and, having raised the issue with the AMF, said it reserved the right to take legal action.
In January 2016, the AMF said it would look closely at information provided by Casino and Muddy Waters to see whether the U.S. short-seller and research firm had overstepped the mark when it published its December critique into Casino.
However, the AMF did not say at the time if it had launched an actual formal investigation into the matter.
An AMF investigation usually takes about a year but some probes can take longer due to their complexity and because they require international cooperation.
Casino, which saw its credit rating cut to junk status by Standard & Poor's in March, has been selling assets to cut debt while improving its performance in France and simplifying its complex group structure.
Shares in Casino are up by around 1 percent so far in 2016, having slumped around 45 percent in 2015.
(Reporting by Dominique Vidalon; Editing by Jean-Michel Belot and Sudip Kar-Gupta)