* Elliott urges restructuring of holding group that controls Bezeq
* Fund seeks resignation of directors implicated in investigation
* Bezeq shares up 4.5 pct in Tel Aviv (Adds details from letter, background, share reaction)
TEL AVIV, Jan 16 (Reuters) - Activist investor Elliott called for sweeping changes to the board of Bezeq Israel Telecom as it disclosed it has a 4.8 percent stake in the company, which has been under investigation by Israel's securities watchdog.
In a letter sent to Bezeq's interim chairman David Granot on Tuesday, Elliott Advisors (UK) Ltd called for a restructuring of the holding group that controls Bezeq and the immediate resignation of some members of Bezeq's board.
"Moreover, we believe that the board of Bezeq, as currently composed, is no longer fit for purpose," Elliott said in the letter, which was emailed to media. "A number of the directors are subject both to investigations of serious financial misconduct at Bezeq and/or are affiliated with Eurocom, which is subject to legal actions by its creditors."
Debt-laden Eurocom Group controls Bezeq.
The Israel Securities Authority (ISA) has been investigating Bezeq, focusing on allegations that former chairman Shaul Elovitch, who owns Eurocom, had meddled in the merger in 2015 between Bezeq and its satellite TV unit YES for personal financial gain. Elovitch has denied any wrongdoing.
Elliott called for the immediate resignation of all Bezeq directors implicated in the ISA's investigation and those affiliated with Eurocom.
"Such directors should be replaced with independent and professional directors elected from a slate of candidates proposed by an independent special committee of the board," the letter said.
Bezeq shares were up 4.5 percent in midday Tel Aviv trade.
Eurocom Chairman Elovitch is under pressure to sell Eurocom, which is laden with nearly 1 billion shekels ($293 million) in debt.
On Monday Eurocom petitioned a Tel Aviv court to allow a debt settlement that would bring it a new controlling shareholder - a group led by U.S.-Israeli businessman Naty Saidoff.
Elliott, in its letter, said that in the event of a change in ownership of Bezeq, the directors nominated by the new controlling shareholder should be chosen according to their relevant experience in businesses at this scale, "and their clean, established record."
Key Bezeq shareholders should be consulted on the identity of new directors and their appointment should be confirmed by a shareholder meeting, it said.
Elliott noted that independent shareholders own 73.7 percent of Bezeq.
"We ... believe there is significant value to be unlocked if the right steps are taken to improve the company's corporate governance," the letter said.
Elliott Advisors is an affiliate of New York-based Elliott Management Corp. ($1 = 3.4078 shekels) (Editing by Steven Scheer and Susan Fenton)