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UPDATE 1-Burford brings in interim CFO in governance overhaul

Muvija M and Kirstin Ridley

(Adds details, quotes, Muddy Waters comment)

Aug 15 (Reuters) - Burford Capital, the litigation funder embroiled in a stand-off with short-seller Muddy Waters, on Thursday replaced its chief financial officer after investors raised concerns about her marriage to the CEO.

Burford said Elizabeth O'Connell would be replaced by Jim Kilman, a former vice chairman of Morgan Stanley Investment Banking, with immediate effect, a search would begin for two new independent board directors and Chief Executive Christopher Bogart would join the board "in due course."

Kilman would "buttress confidence in Burford's financial disclosures" and guide the company as it explores a dual listing in the United States -- or a listing on London's blue-chip market if a transatlantic market debut is too challenging, Burford said.

"Mr. Kilman has agreed to serve for up to two years as CFO and the board, once reconstituted ..., will take up succession planning for the CFO role as a priority," Burford said.

The company's beleaguered stock, which plunged more than 50% after Muddy Waters issued a report last week challenging its accounts, pared further losses and climbed 12.42 percent to stand at 880.75 pence by 1540 GMT.

But Muddy Waters, founded by Carson Block -- an American who built up his reputation by alleging fraudulent activities at Chinese firms he targeted -- called the notion that Kilman would improve governance "a farce."

"It is clear from this that Burford is more interested in imposing fig leaves than real guard rails," the hedge fund said in a statement. "We note Mr. Kilman was Burford's principal investment banker at Morgan Stanley..."

"Burford investors would be much better served by a CFO from the outside..."

(Additional reporting by Simon Jessop; editing by David Evans)