SocGen’s Mustier Leaves Bank Amid French Insider Trading Probe

By Fabio Benedetti-Valentini

Aug. 7 (Bloomberg) -- Societe Generale SA, France’s second- largest bank by market value, said former investment-banking chief Jean-Pierre Mustier quit after the market regulator’s sanctions commission opened an insider trading probe.

Mustier, 48, who ran the investment bank at the time of a 4.9 billion-euro ($7 billion) trading loss in January 2008, had planned to leave by year-end, Paris-based Societe Generale said in an e-mailed statement yesterday. He brought forward his departure “in the interest of the group,” the bank said.

Robert Day, who founded Los Angeles-based TCW Group Inc. in 1971 and serves on Societe Generale’s board, is also under investigation by the watchdog’s sanctions commission for possible insider trading, the bank said. Day, 65, and Mustier reject the allegations, the company said in the statement, which didn’t provide further details of the investigation.

Christine Anglade, a spokeswoman for the Paris-based Autorite des Marches Financiers, confirmed that the regulator sent letters of grievance to Day and Mustier opening proceedings before the sanctions commission. She declined to elaborate. Societe Generale also said an investigation started by the regulator in January 2008 into its financial information and shares has ended.

Kerviel Loss

Societe Generale announced a record trading loss on Jan. 24, 2008, blaming it on unauthorized positions amassed by Jerome Kerviel, at the time a 31-year-old junior trader. Kerviel has said his superiors at the bank knew of his actions.

Day, 65, and his foundation sold 45 million euros of Societe Generale shares less than a week before the trading loss was made public, the regulator said on its Web site last year.

“At no time did Robert Day trade on inside information in SocGen shares,” Josh Pekarsky, a spokesman for Day, said in an e-mailed statement. The probe isn’t related to the “Kerviel matter or disclosures made to the bank’s board in January 2008 regarding SocGen’s potential subprime exposure,” he said.

Day cooperated with the AMF’s inquiry and will remain a member of Societe Generale’s board, Pekarsky said.

The bank had to turn to shareholders for 5.5 billion euros in a stock offering following the trading loss last year. Daniel Bouton, 59, stepped down as chairman this April after complaining of “repeated attacks” in the media during the months following the loss.

No Insider Information

Mustier, in an internal memo to staff published on the Web site NouvelObs.com, said the probe relates to shares he sold on Aug. 21, 2007. In the memo, he says he didn’t have any insider information at that time and sold the stock as he reduced his overall equity portfolio. He retained half of his Societe Generale shares, according to the memo.

Mustier is leaving Societe Generale with no departure payment, he told NouvelObs.com in an interview. Mustier, who declined to give the amount of his holdings as of August 2007, said the AMF estimates the gain he could be blamed for at between 50,000 euros and 200,000 euros, NouvelObs reported.

Societe Generale spokeswoman Astrid Brunini didn’t return calls seeking comment.

An engineer by training, Mustier joined Societe Generale in 1987 in Paris as a stock options trader. He held senior executive positions at the investment bank in Paris, Tokyo and Hong Kong before becoming chief executive officer of the corporate- and investment bank in 2003. He moved to head the investment-management division last year after the trading loss.

To contact the reporter on this story: Fabio Benedetti-Valentini in Paris at fabiobv@bloomberg.net.