Watford are reportedly in danger of facing a fine and points deduction over allegations that the club supplied a forged banking letter to the English Football League.
The governing body is investigating the allegations, which centre around Gino Pozzo's takeover of the club from his father Giampaolo in 2014.
The EFL launched the investigation after The Telegraph reported the allegations regarding the takeover of Watford, who were a Championship club when Gino took sole control of them.
An EFL spokesman said: "We can confirm, following receipt of information from the Daily Telegraph, that we immediately commenced a disciplinary investigation into serious allegations made against Watford Football Club.
"The club has been formally contacted by the EFL and is now required to provide a full and detailed response to the allegations. Once that response is received, it will be fully considered by the EFL and appropriate action will be taken under our rules and regulations.
"We will not be making any further comment until we are in receipt of the club's response."
Walter Mazzarri's side are currently ninth in the Premier League table after taking 12 points from nine games.
