The Channel Islands Stock Exchange (CISX) has been fined by £190,000 ($306,500) by the Guernsey Financial Services Commission over failings relating to Arch Cru following a two-year investigation.

The Channel Islands Stock Exchange (CISX) has been fined £190,000 ($306,500) by the Guernsey Financial Services Commission over failings relating to Arch Cru following a two-year investigation.

The commission said in a statement that it was satisfied that former chief executive Tamara Menteshvili did not breach any regulatory requirement and that further enforcement activity was “unlikely to be appropriate”.

The fund – which incorporates a number of portfolios - was suspended in March 2009 by the Financial Services Authority, which declared it insolvent. Its value then was £363.6 million, but by March 2011 it had declined to £148.8 million.

The commission launched an investigation into the CISX in February 2012, in relation to transactions in the listed securities of Arch Guernsey ICC and its incorporated cells, in which transactions had been implicated in possible market manipulation and other forms of irregular trading.

In October 2013, once the initial evidence gathering process was completed, commission senior staff sought advice from senior London counsel as to whether enforcement action was appropriate.  

On 20 December 2013, the commission’s senior staff issued a draft enforcement recommendation and on 31 January 2014. the commission and the CISX entered into a settlement agreement.

The CISX admitted that it was “seriously at fault” and paid a penalty of £190,000.

“The commission confirms that its investigation has revealed nothing that would justify any action in relation to any present or former non-executive directors of the CISX. Those individuals have throughout been and remain fit and proper persons in good standing,” the commission said in a statement.

In some cases, Arch Cru was sold as a medium to low risk investment, but it was in fact high risk. It was suspended in March 2009 by the FSA following a warning that it could no longer trade due to pricing and liquidity issues.

The CISX was replaced by the Channel Islands Securities Exchange at the end of December last year after its business was acquired by the Channel Islands Securities Exchange Authority.

The Channel Islands Securities Exchange declined to comment when contacted by this publication.

The case drew national attention earlier this year as it led to the resignation of chief minister Peter Harwood after satirical magazine Private Eye highlighted his conflict of interest as chairman of the Guernsey Financial Services Commission and a non-executive director at the CISX.