Stock exchange officials have not officially mentioned the link with the Arch Cru funds, but sources in Guernsey say this is what is widely believed in the market to have caused the problems that led to the current situation.
CISX officials did not immediately respond to a request for comment this afternoon.
As reported here on Tuesday, the Channel Islands Stock Exchange (CISX) quietly announced in a statement on its website on Monday that it had suspended all new listings, while an investigation begun in early 2012 is brought to a close.
The statement disclosing the investigation and announcing the suspension followed the resignation of the stock exchange’s founder and chief executive, Tamara Menteshvili, last month, to "pursue other interests".
Thousands of retail investors lost money when the Arch Cru funds were suspended in 2009.
Although efforts are being made to reassure investors and those with listed entities on the exchange, there is widespread uncertainty among financial services executives in Guernsey, and few are willing to talk about the matter until more is known.
Statements from Guernsey Finance, GIFA, govt
Towards that end, Guernsey Finance and the Guernsey Investment Fund Association issued their first statements on the matter around midday on Thursday, essentially welcoming the steps that the exchange – evidently now under the guidance of its chairman, senior venture capitalist Jon Moulton – has taken thus far, and which it says it plans to take over the next few weeks.
Kevin Stewart, Guernsey’s commerce and employment minister, who Tuesday said his department was focusing on getting "a clear understanding of the issues and addressing any immediate or potential impacts", today said: “Following constructive discussions today, I would like to reiterate that there remains active dialogue with a range of stakeholders, including engagement with the chairman of CISX, in his efforts to review the structure of the exchange.
"The GFSC has also given a commitment to work closely with the CISX. In the immediate term, I have been assured that personnel at the CISX are committed to continuing to work closely with trading partners in order to assess and manage the ongoing business needs of existing clients.”
Vic Holmes, Chairman of the Guernsey Investment Fund Association (GIFA), added: “Clearly the initial news concerning the CISX has been extremely disappointing for the local investment community and also our client base. However, I am pleased to see the way in which the CISX is working with government, the regulator and industry now to provide greater clarity to our clients."
An operational statement posted on the CISX website yesterday and which provides guidance as to the types of listing application the exchange is currently willing to consider, he said, was "very much welcomed, and we now look forward to news about the structure of a new exchange".
The chief executive of Guernsey Finance, which promotes Guernsey’s financial services industry, stressed that CISX is continuing to operate, and that its operational statement today provided the clarity the market needed.
“Firstly, it is important to recognise that the CISX is still accepting certain listings applications from existing debt issuers, existing trading companies and existing open and closed ended funds," Fiona Le Poidevin said.
"In addition, the exchange has clarified that [while] it is not currently processing any new applications for issuers that are not already listed on the exchange, it has sole and absolute discretion to consider applications on a case by case basis.
“This clarification is extremely useful to clients, and the next stage will be for the CISX to advise members in due course of the newly structured exchange.
"Mr Moulton stated on Monday that he hopes proposals for the new exchange will be available in around one month, and we await further information on this in order to provide certainty for clients of the CISX in both Guernsey and Jersey.”
‘Defects’ in the ‘complex, unusual structure’
In his original statement on the CISX website on Monday, Moulton cited "defects" in the "complex and unusual structure" of the exchange, and said that in order to deal with these, as well as to segregate certain "historic issues" uncovered by the investigation, "it is intended to seek to establish a better structured and regulated new corporate vehicle".
"This is a substantial understaking, and proposals are hoped to be available in around a month," Moulton noted in his statement.
Apart from the suspension of new listings, all other functions at the stock exchange would "continue as normal", Moulton said.
He said that it was not possible at that moment in time to assess the "potential effects upon the company’s business model" of the investigation, but stressed that the investigation was focussing on certain of the exchange’s "historic activities".
"There are no investigations in respect of current matters," he said.
Separately, Moulton noted in his statement that although the exchange remained "very liquid, with substantial net cash" on hand, it was not expected to make a profit this year, owing to "significant costs" incurred as a result of the departure of Menteshvili.
Some £500,000 had been set aside by the CISX to cover costs to date and any "possible regulatory settlements, although no liability for such is currently [being] admitted," he added.
