OTTAWA (AP) _ The head of Canada's intelligence service resigned Friday after the agency admitted bungling a wiretap application in a murder conspiracy case involving Sikhs and a visiting Indian official.

Prime Minister Brian Mulroney's office announced the resignation of Ted Finn as director of the Canadian Security Intelligence Service, but made no direct reference to the wiretap case.

Reid Morden, 46, currently assistant secretary to the Cabinet, was named as Finn's replacement, Mulroney said hours later.

Mulroney also said Finn had accepted an appointment as special adviser to the solicitor general.

The prime minister announced four other high-level appointments.

He said Gordon Fairweather, 64, will become a special adviser to the employment and immigration minister; Max Yalden, 57, the ambassador to Belgium, will replace Fairweather as chief commissioner of the Canadian Human Rights Commission; Harry Swain, 45, assistant secretary to the Cabinet for economic and regional development, will become deputy minister of Indian and northern affairs, and Harold Bjarnason, 49, assistant deputy minister in the grains and oilseeds branch of Agriculture Canada will the agency's associate deputy minister.

Solicitor General James Kelleher later told reporters that although Finn was not directly involved in the bungled wiretap, ''he is the gentleman responsible for ensuring the service operates in an error-free atmosphere.''

Kelleher said he did not rule out disciplinary action against intelligence agents in the case.

Finn and his agency have been under attack for months. There have been charges that the agency conducted unwarranted surveillance of legitimate labor and political groups, failed to recruit enough French speakers in bilingual Canada and still relied on officers of the old security service.

The agency was created in 1984 to provide civilian control over intelligence because of complaints about how the Royal Canadian Mounted Police had handled the duties.

In the latest embarrassment Friday, a lawyer for the agency admitted in Ottawa federal court that the service took the word of an unreliable informant and made other ''extensive and serious errors'' in getting court approval for a wiretap that led to criminal charges against a Canadian Sikh.

John Sims, the lawyer, said the 1985 wiretap warrant against Harjit Singh Atwal of Surrey, British Columbia, should not have been issued.

His revelations could undermine the case against Atwal and eight other Sikhs awaiting trial in British Columbia on charges of trying to kill Malikat Singh Sidhu, planning minister of India's Punjab state, during his visit to Vancouver in May 1986.

The trial has been scheduled to begin this month and the wiretap evidence was central to the prosecution case, defense lawyer David Gibbons said.

Sidhu was wounded in the attack. Four other defendants in the case already have been convicted of attempted murder and sentenced to 20 years in prison.

In another case involving alleged Sikh terrorism, five Canadian Sikhs were tried in Hamilton, Ontario, earlier this year and acquitted of planning violent acts in India. The prosecution admitted wiretap evidence was tainted.

Francis Saunders, a spy agency official, told the court Friday the mistake in the Atwal case was partly due to pressure to solve the June 1985 bombing of an Air India flight from Toronto to Bombay that killed all 329 people aboard.

Government officials say police have identified Sikh suspects but do not have enough evidence for trial.

Sikh militants have conducted a terror campaign for years as part of an effort to establish an independent Sikh nation in Punjab, the only state in overwhelmingly Hindu India where members of the sect have a majority.