News of the suspension came in a statement posted yesterday on the stock exchange’s website, which was signed by Jon Moulton, chairman of the exchange, and came in the wake of the resignation of its founder and chief executive, Tamara Menteshvili last month.
The statement 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.
Moulton, a resident of Guernsey, is also chairman of Better Capital, a private equity firm, and former managing partner of Alchemy.
Apart from the suspension of new listings, all other functions at the stock exchange "will continue as normal", Moulton said.
He noted that it was not possible at this 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.
Surprise
The news about CISX appeared to catch many in the industry by surprise.
A spokesman for Guernsey Finance said it was not immediately commenting on the matter "as we still don’t have clarity for current/future business". Guernsey’s Minister for Commerce & Employment, Kevin Stewart, said that since CISX chairman Moulton issued his statement yesterday he has "been in discussion with key stakeholders and industry with regards to this matter, and this continues today".
"Our efforts at C&E are focused upon obtaining a clear understanding of the issues and addressing any immediate or potential impacts at this current time,” Stewart added.
Carey Olsen, the international law firm, issued a note to its clients to ensure, it said, that "anyone who is currently undertaking or advising on a new CISX listing or who plans to embark on listing activities in the near future" was aware of the situation and their options.
Although the exact details of the planned restructuring have not yet been made available, Carey Olsen said it had been informed by CISX officials that there was "no suggestion that the proposals will have any effect on the status of the existing exchange as a recognised stock exchange for UK tax purposes".
"We have also been told that the existing exchange will be maintained, although it may be that issuers are given the opportunity to migrate to a new exchange in due course," the Carey Olsen note added.
"It is anticipated that the only impact will be the temporary hold on dealing with entirely new listing applications for a one-month period, [while] resources are reassigned at the CISX, in order to put in place the new structure."
Founded 15 years ago
Established in October 1998, the CISX operated out of St Peter Port as a limited company, and in April, listed its 5,000th security, having taken on 510 new listings in 2012, up from 498 the previous year. Trading volumes in 2012 also rose by 64% in 2012.
Until announcing her departure on 10 Sept "to pursue other interests", Menteshvili had headed up the CISX from its inception. Before that, she had served as a deputy director of investment business at the GFSC between 1995 and 1998, and prior to this, worked from 1972 to 1989 for Merrill Lynch in New York and London. With ML she reached the position of vice president and regional administration manager of institutional sales. She was described in a Financial Times profile in 2008 as having been born in the UK but became a naturalised US citizen.
