The Guernsey Financial Services Commission has handed out fines to the Arch cru administrator Bordeaux and three of its directors for their role in the collapse of the funds.
Bordeaux has been fined £150,000, while directors Peter Radford, Neal Meader and Geoffrey Tostevin have been hit with penalties of £50,000, £30,000 and £30,000, respectively.
In addition, all three have been barred from senior positions in regulated businesses for at least five years.
The GFSC says: “The Bordeaux directors demonstrated a consistent and serious lack of appropriate competence, judgement and diligence.
“Their conduct demonstrated a lack of understanding and attention to the legal obligations of Bordeaux.”
Bordeaux was the designated manager and administrator for the Guernsey-based Arch cru funds from January 2007 to December 2009, including its 26 incorporated cells, in which time Radford, Meader and Tostevin were directors and controllers of the business.
An investigation by the GFSC found that responsibility for determination of the net asset value of the funds was delegated to Bordeaux by Arch Financial Products.
However, because of delays by Bordeaux in reporting these figures, investors were not provided with up to date information, while investment manager while Arch was able to execute trades on the basis of more recent data.
“This could have led to the creation of a false market as independent investors would have dealt, or considered dealing, on indicative sale prices that were not properly reflective of NAV,” the regulator says.
The regulator also says that prior to October 2008, Bordeaux calculated a given investment cell’s NAV on a “par plus accruals” basis, meaning it would simply add the expected income from loan notes to the previous month’s figures.
This may explain why the NAVs at the end of February 2009 were substantially higher than in March and April, after regulators stepped in to suspend the fund, the GFSC says.
In addition, the Guernsey watchdog says Bordeaux was “totally reliant” on Arch for valuations of unlisted securities.
The ruling comes seven months after the FCA won its legal battle against the fund manager behind the collapsed Arch cru range.