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UPDATE 2-SocGen's Mustier quits amid insider trading probe

* AMF proceedings started against 2 execs

* Jean-Pierre Mustier, Robert Day deny allegations

* SocGen said Mustier probe not linked to Kerviel scandal

* Deputy CEO Cabannes to take on Mustier’s old role (Adds analyst comment, further detail)

By Sudip Kar-Gupta and Helen Massy-Beresford

PARIS, Aug 6 (Reuters) - France's market watchdog began an insider trading probe against two Societe Generale SOGN.PA executives, including Jean-Pierre Mustier, who announced his resignation from the French bank hit by a 2008 trading scandal.

SocGen said on Thursday it had been told by Mustier and non-executive director Robert Day that they had each been advised by the AMF regulator of insider trading proceedings against them.

SocGen said both men reject the allegations and added that the bank did not comment on ongoing individual procedures.

Mustier, a high-flying banker once seen as a future head of SocGen, ran the group’s investment banking arm at the time of the Jerome Kerviel scandal which rocked SocGen last year.

In January 2008, SocGen unveiled 4.9 billion euros of losses which it said were caused by unauthorized deals carried out by Kerviel, a junior trader at the bank.

Kerviel remains under formal investigation for breach of trust, computer abuse and falsification.

SocGen said the investigation of Mustier was not related to the Kerviel affair, but declined further comment on the situation.

French magazine Le Nouvel Observateur reported on its website that the probe against Mustier related to the sale of shares during the summer of 2007. The AMF declined to comment on the Nouvel Observateur report.

Robert Day runs TCW, an American asset management business owned by SocGen. Day sold SocGen shares a few weeks before SocGen announced the trading losses in January last year.

SHADOW OF KERVIEL STRIKES AGAIN

Mustier had already offered to resign in the immediate aftermath of the Kerviel scandal last year, but SocGen wanted him to stay on to help the bank recover from the debacle.

He was eventually replaced as head of corporate and investment banking and moved on to run the group’s asset management arm.

However, Mustier became sidelined after SocGen merged its asset management arm with that of Credit Agricole CAGR.PA, in a deal which gave Agricole control of the new fund management group.

SocGen said deputy chief executive Severin Cabannes would take on Mustier’s old role in addition to his existing post.

Mustier is the latest in a string of high-profile SocGen bankers who have left in the aftermath of the Kerviel affair.

Former chairman Daniel Bouton -- who faced calls to step down from French President Nicolas Sarkozy over the Kerviel scandal -- resigned from his post earlier this year and handed over his chairman’s role to Chief Executive Frederic Oudea.

Agilis Gestion fund manager Arnaud Scarpaci said the insider trading probe and departure of Mustier could hit SocGen shares.

“There is a risk that the stock could come under pressure,” he said. “This is going to put a lot of pressure on Oudea.”

The losses caused by the Kerviel scandal reignited speculation that BNP Paribas BNPP.PA, France's biggest bank by market capitalization, might bid for SocGen but Oudea said this week that the bank still aimed to stay independent.

SocGen shares closed up 3.3 percent at 50.70 euros on Thursday before it announced the probe, giving the bank a market capitalization of around 31 billion euros.

The stock has risen 41 percent so far this year, less than a 46 percent gain in the DJ Stoxx European bank sector .SX7P. It fell 61 percent last year. (Editing by David Cowell and Gerald E. McCormick)

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