The investigation into the undisclosed personal misconduct allegation is ongoing, said WPP's Buchanan Communications in a statement. "The allegations do not involve amounts which are material to WPP".
The exact nature of the allegation remains unclear but is widely reported to center on use of company funds.
Sorrell, 73, has led the UK-based WPP for more than 30 years, building what was initially a shopping basket maker into the world's largest advertising agency holding company.
Sorrell has headed WPP since 1986, and has no clear successor. "I reject the allegation unreservedly but recognize that the Company has to investigate it".
European factory growth knocked by "Beast from the East"
But it held above the 50-point threshold mark that separates growth from contraction for the eighth straight month. Fixed-term employment was first notified in apparel manufacturing sector.
"I understand that this process will be completed shortly", he said.
In the U.S. securities litigation firm Block & Leviton said it was looking into whether WPP and certain of its officers and directors violated federal securities laws. "It is unclear how readily any executive could fill Sorrell's shoes in orchestrating assets across the holding company when they need to work together".
We wait to see how WPP's shares react to the overnight news.
Shares in the company are now trading -1.98 percent as of 12.43 PM (GMT).
"The message for our people and clients is one of business as usual within our operating companies and client teams", the company said in the memo, according to two WPP employees who received it, who asked not to be identified as the document isn't public.
Sorrell, who has topped Britain's annual executive-pay lists on several years including 2014 and 2015, has in recent years become the focus of investor criticism over CEO compensation.