Channel Islands Stock Exchange closed to new members

image captionStockbroker John Ravenscroft said he was surprised by the suspension

The Channel Islands Stock Exchange (CISX) has stopped admitting new members after "defects" were discovered in the way it was set up.

The problems were highlighted during an investigation by the Guernsey Financial Services Commission (GFSC), which has been going on for 20 months.

Chairman John Moulton said it related to "historic activities" rather than "current matters".

He said it was not possible to assess the likely impact of the investigation.

Simon Melling, the chief operating officer of stockbrokers Ravenscroft, said he was surprised by - and concerned about - the suspension of new listings.

Business lost

"We need to resolve this situation very quickly," he said. "Otherwise, it's going to start having a detrimental effect on the reputation of the island.

"Being able to list things on the Channel Islands Stock Exchange is an extremely important part of our business and we have a number of live deals... which we've had to consider stopping."

Mr Melling said he knew of business - from a legal firm based in Jersey - which had already been lost as a result of the CISX suspension.

He said one firm was already looking to list products in Malta, Mauritius or the Cayman Islands.

CEO John Ravenscroft said he "would have appreciated" being told about the investigation earlier, if only to prepare his staff to field a deluge of phone calls from clients.

He said he looked forward to finding out why the information had not been divulged earlier by either the CISX or the GFSC.

'No profit'

In a statement made on Monday, Mr Moulton said: "The CISX has recently made provision for around £500,000 in respect of costs to date and possible regulatory settlements although no liability for such is currently admitted."

The exchange - which was founded in 1998 - took on 510 new listings in 2012 and reached 5,000 in total in April.

Mr Moulton said the CISX had "incurred significant costs" due to the departure of its chief executive, meaning the exchange was not expected to make a profit this year.

Tamara Menteshvili stepped down as chief executive officer last month after 15 years at the CISX "to pursue other interests".

Mr Moulton said the GFSC was helping the CISX to design a better structure which would be better regulated.

The GFSC refused an interview request from BBC Guernsey but confirmed its investigation related only to historic activities.

"Due to the confidential nature of its investigation, the commission is unable to provide any further public comment," the statement said.

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