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State Comptroller Micha Lindenstrauss said Tuesday the Israel Defense Forces chief of staff and other senior officials must be forbidden from managing their own investment accounts.

Their securities should be placed in blind trusts, or they could invest in mutual funds and they should abstain from direct involvement, Lindenstrauss said.

At present such restrictions only apply to the prime minister and ministers.

Chief of Staff Dan Halutz said he has no intention of resigning following the public and political outcry against him Tuesday after daily Maariv published a story that he had sold stocks several hours after a Hezbollah raid inside Israel on July 12.

Halutz has rejected the criticism against him, calling it "malicious." But he doesn't have the backing of top officers, who say Halutz should resign.

Three hours after Hezbollah attacked an IDF patrol and abducted two soldiers, at 12 noon, Halutz called his investment adviser at the Bank Leumi branch on Dizengoff Street in Tel Aviv and ordered him to sell the shares in his investment portfolio, worth NIS 120,000.

Over the next two days the value of the stock in the Tel Aviv stock exchange lost 8.3% of its value.

During the hours that the chief of staff was avoiding financial losses, he was also participating in meetings with the General Staff and the defense minister, in which he recommended a heavy air assault against Lebanon, resulting in an escalation and a full scale war between Israel and Hezbollah.

Halutz told Maariv that "one cannot link (the sale of the stock) with the war. Such a connection is fantastic. At that time I did not think and did not expect that war would occur."

The IDF spokesman said, "The chief of staff is handling the financial affairs of his family on a daily basis, like any other Israeli citizen. Routine banking operations are part of this management... the chief of staff works day and night to protect the lives of the citizens and of IDF soldiers."

During a meeting with military correspondents Tuesday, Halutz briefly referred to the affair. He confirmed the details released in the story but argued that the publication was "wicked and tendentious. I do not know who is behind this. I do not intend to be dragged to such levels, questioning my integrity.

"I am also a citizen. I also have finances. This is a stigma lacking in all basis. Any further response to this is not appropriate. The facts are correct, but the music [the way things were analyzed in the press] is false, tendentious... It is not worthy of any explanation."

Responding to a question he added, "I think I genuinely became a punching bag as a result of the situation at the end of the war. I am willing to face off with anyone in the State of Israel over the ethics of my actions."

The affair raised a genuine storm in the IDF. Senior General Staff officers and officers in combat units alike expressed severe criticism at Halutz's conduct. They said it was a reflection of lack of understanding of what was was going on in the war.

The officers said Halutz now faces a "breach of confidence" in his leadership and they expressed doubts in his ability to correct the problem.

The officers added that it would be difficult for Halutz to look veterans of the war in the eyes, and meet families who lost sons in the war. "His priorities are distorted," they said.

Officers in various ranks noted that the publication of the story came at a time when there is a serious morale problem in the army and the country, following unsatisfactory results in the war in Lebanon and the serious shortcomings that emerged.

Some senior air force officers in the reserves did come to the defense of their colleague.

At this stage it is unclear how the affair will affect Halutz's tenure at the head of the IDF. Neither the prime minister nor the defense minister issued a statement on the matter and some officers believe the outcome of the affair will depend on the intensity of the public outcry.