Deutsche Börse to pay €10.5m to end insider trading investigation

Deutsche Börse chief executive Carsten Kengeter is set to personally pay a penalty of around €500,000 as part of the exchange’s plan to swiftly end the long-running investigation into his alleged insider trading.

The group, Europe’s largest bourses operator by market capitalisation, made its move to end the seven-month probe late on Wednesday by agreeing to pay penalties totalling €10.5 million.

It also said it would not discuss whether it would renew Mr Kengeter’s contract – which expires in March next year – until after all the regulatory investigations triggered by the episode had been concluded.

The Frankfurt prosecutor has proposed two fines, €5 million related to the insider trading investigation and €5.5 million related to an alleged failure to disclose market-sensitive information before Deutsche Börse publicly confirmed plans to merge with the London Stock Exchange Group (LSEG) in early 2016. The deal was blocked by European antitrust regulators this year.

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Mr Kengeter’s payment is in addition to the €10.5 million penalty.

His spokesman declined to comment.

In February authorities raided Mr Kengeter’s home and office as part of the probe into his purchase of 60,000 shares worth about €4.5 million in December 2015, weeks before formal talks between Deutsche Börse and the LSEG began. When the news became public in February 2016, shares in both exchanges rose.

Incentive scheme

The share purchases were part of the company’s long-term incentive scheme and cannot be sold until 2019.

Mr Kengeter has consistently denied any wrongdoing.

In agreeing to settle, Deutsche Börse said it assumed the investigation into Mr Kengeter would be closed, subject to additional conditions being approved by a local court.

Those conditions were not made public by the company. But they include the payment from Mr Kengeter to account for the “virtual profit” he made on the shares in the three months between purchasing them and the deal becoming public, according to two people briefed on the settlement.

The local court is set to hear the settlement in coming weeks. Manuel Lorenz, head of the German capital markets practice at Baker McKenzie, the law firm, in Frankfurt, said the procedures for settling a criminal investigation were not straightforward.

“But I would be slightly surprised if the court ruled that they weren’t going to approve this.”

Deutsche Börse said the allegations “are unfounded in all respects” but added: “the decision to nevertheless accept the fines was made for the purpose of protecting the overriding interests of the company.”

– Copyright The Financial Times Limited 2017