No settlement in Deutsche Boerse insider trading investigation in Germany

The local court in Frankfurt has rejected an offer by Deutsche Boerse's chief executive to pay €500,000 in order to settle an insider dealing investigation against him.

In a major setback for Deutsche Boerse and its current Chief Executive Carsten Kengeter, on Monday 23 October 2017 the local court in Frankfurt has rejected an offer by Mr Kengeter to pay €500,000 in order to settle an insider dealing investigation against him. The criminal case is now being transferred back to the German public prosecutor who will decide on next steps, which could mean either that the proceedings are closed for lack of evidence or that charges are brought. The court has previously accepted the offer by Deutsche Boerse to pay €10.5m in the related allegation that it violated insider trading laws and failed to inform the market early enough on the planned merger with the London Stock Exchange.

The case follows Mr Kengeter’s purchase in December 2015 of €4.5m of Deutsche Boerse shares as part of an executive compensation program, a purchase which at the time was approved by Deutsche Boerse’s supervisory board. Approximately two months later it became public that Deutsche Boerse and the London Stock Exchange were discussing a possible merger, which discussions have since been abandoned but at the time increased Deutsche Boerse’s share prices. The allegation by the German prosecutor is that Mr Kengeter knew of the possibility of merger discussions before he purchased the shares which may amount to insider trading, an allegation that has always been denied by him.

Mr Kengeter has since announced that he will step down from his position. He will be succeeded as CEO by Theodor Weimer (a UniCredit banker). Newspapers report that on 01 December 2017, the German regulator BaFin said that it is questioning Deutsche Boerse over how it communicated Mr Weimer’s appointment and has asked Deutsche Boerse for information on the timing of the disclosure. A fine for delayed disclosure could be up to 2% of annual sales (or €48m). BaFin said that it was looking into Deutsche Boerse potentially misleading the public on an investigation by prosecutors into the allegations of insider trading by Mr Kengeter.

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