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Germany’s stock exchange proposes tougher rules after Wirecard scandal

Bull and bear statues are pictured outside Frankfurt's stock exchange February 1, 2012.
Bull and bear statues outside Frankfurt's stock exchange. Photo: Alex Domanski/Reuters

Deutsche Börse, Germany’s stock exchange operator, is considering stringent new admission rules as part of reforms in the wake of the Wirecard accounting-fraud scandal.

It is also proposing increasing the size of the blue-chip DAX index (^GDAXI) from 30 to 40 companies.

“It's no secret that I personally would welcome the expansion of the Dax 30 to a Dax 40,” said Deutsche Börse chief executive Theodor Weimer on Monday. "I am looking forward to the result and am sure that the further development of the criteria will help the German capital market to achieve further quality.”

READ MORE: German lawmakers to launch parliamentary probe into Wirecard scandal

Investors have until 4 November to submit their comments on the stricter new admission criteria, which include banning companies from the DAX if they don’t submit their accounts on time.

Members of all the German indices, which include the DAX, MDAX, TecDAX and SDAX, would also need to show proof of an audit committee on their supervisory board in future.

The new proposals say that companies should be demonstrably profitable before they can move up into the leading DAX index.

In addition, firms making more than 10% of their revenue from controversial weapons sales would be excluded from the indices, which include the DAX, MDAX, TecDAX and SDAX.

As part of the proposals, the small-cap MDax would shrink by 10, to a total of 60 companies.

The German financial world and the political establishment has been rocked by the enormous scandal at payments company Wirecard, after it emerged in June this year that billions were missing from its balancesheet.

READ MORE: Germany’s financial regulator chief rules out resigning over Wirecard scandal

Wirecard declared bankruptcy in June, and was ejected from the DAX in August. The former German fintech darling had ousted Commerzbank from the blue-chip index when it joined in 2018.

Insolvency administrators are currently in the process of selling off the company’s assets to try and recoup some of the billions owed to its creditors.

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