German regulator to assess suitability of Deutsche Boerse management

FRANKFURT (Reuters) - A German regional exchange regulator will assess the suitability of Deutsche Boerse's management board after allegations of insider trading against the company's chief executive officer earlier this year.

The local exchange regulator in Germany's western state of Hesse said in an emailed statement on Wednesday that "the audit will cover all persons who were responsible for possible legal wrongdoings," without providing any names.

The regulator has the power to remove a board member it deems unfit.

A Deutsche Boerse spokesman declined to comment on the news of the investigation, which was first reported by German magazine WirtschaftsWoche.

Earlier this year, police and prosecutors searched CEO Carsten Kengeter's office and home amid concerns over Deutsche Boerse share purchases he made just months before the announcement of merger talks with London Stock Exchange (NYSE: LSE).

Kengeter has always denied the allegations, saying the purchases were part of an official Deutsche Boerse compensation plan. "Insider trading goes against everything I stand for," he told shareholders in May.

On Tuesday, Deutsche Boerse said the Frankfurt public prosecutor was dropping its investigation into Kengeter and asked Deutsche Boerse to pay 10.5 million euros ($12.1 million) of fines for failing to notify the public in a timely way about the LSE merger talks and for the design of its executive share-buying scheme.

Deutsche Boerse has said those allegations were "unfounded in all respects."

In a separate development on Wednesday, the German markets regulator BaFin said that it was conducting an investigation of Deutsche Boerse's Tuesday announcement. BaFin did not give a reason for its investigation.

WirthschaftsWoche, which was first to report the BaFin investigation on Wednesday, said the Frankfurt prosecutor's communication to Deutsche Boerse had said nothing of dropped proceedings against Kengeter.

A Deutsche Boerse spokesman said on Wednesday, "We stand by our statement" made on Tuesday.

Neither Deutsche Boerse nor the Frankfurt prosecutor has made public its notice to Deutsche Boerse.

($1 = 0.8686 euros)

(Reporting by Hans Seidenstuecker and Tom Sims; Editing by Andreas Cremer, Mark Potter and Jane Merriman)

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