The Channel Islands Stock Exchange has been fined £190,000 by the Guernsey Financial Services Commission after admitting it was “seriously at fault” in relation to transactions which were implicated in “possible market manipulation”.
At its peak the Arch Cru brand was represented across six Oeics as well as a range of Guernsey-based investment funds, with funds under management totalling more than $1.5bn.
Some 10,000 clients lost most of approximately £422m of investments, most of which were advised.
The board of directors of the Guernsey ICC suspended the trading of shares in the securities on the stock exchange on 27 July 2009, following a suspension of the funds by the UK financial services regulator in March.
The fine follows an investigation, launched in February 2012, in relation to transactions in the listed securities of Arch Guernsey ICC and the cells, “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, it said in a statement.
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 it was “seriously at fault in relation to the events to which the enforcement recommendation related” and has paid a £190,000 fine.
Under the settlement agreement, the Commission reserved the right to pursue enforcement action against other parties as appropriate. The regulator questioned other individuals at CISX including the former chief executive but found that no one had committed any wrong doing.
A spokesman for CISX said: “The Commission confirms that its investigation has revealed nothing that would justify any action in relation to any present or former officer of the CISX. Those individuals have throughout been and remain fit and proper persons in good standing.”
The Arch Cru funds were suspended by the regulator in March 2009, following an ‘Arrow’ visit.
In 2012, the Financial Services Authority launched the Arch Cru consumer redress scheme and told advisers they would have one month from 1 April 2013 to contact clients to give them the opportunity to ‘opt in’ and have their case reviewed.
In November 2012, the regulator issued a public censure against Arch’s former authorised corporate director Capita Financial Managers for its conduct in relation to the CF Arch Cru funds, but the group was not fined due to capital limitations.
Capita has maintained throughout that it is not ultimately responsible for the failure of the funds after it stepped in to suspend them in March 2009. It has also provided more than £30m as part of a £54m redress package, which investors have until December of this year to accept.
