Investor Compensation Fund (ICF) for Investment Firm Clients
What is the Investor Compensation Fund for IF Clients
The Investor Compensation Fund for IF Clients (ICF) is the Fund of its members, established pursuant to Article 59(1) and (2) of Law 144(I)/2007 which provides for the Provision of Investment Services, the Exercise of Investment Activities, the Operation of Regulated Markets and other Related Matters (the Law) as an investor compensation fund for CIF clients other than credit institutions and its powers and functions are regulated by the provisions of the Law and of the Directive 144-2007-15 of CySEC for the Continuance of the Operation and the Operation of the IF Investor Compensation Fund (the Directive).
What is the purpose of the ICF and who may submit an application for compensation?
The purpose of the ICF is to secure the claims of covered clients against the ICF members through payment of compensation, if the necessary preconditions are fulfilled.
All non-professional investor-clients of an ICF member who is covered by the ICF for claims against such member, arising out of the covered services provided by the member, may apply for compensation.
The applicant may be natural or legal persons, or a union of persons or a group of assets devoid of legal personality.
When can applications be lodged?
In all cases and provided one of the preconditions mentioned in sub-paragraph (1) of Paragraph 3 of the Directive is fulfilled, the claims must arise out of the investment services provided by the ICF members or the ancillary service of paragraph (1) of Part II of the Third Schedule of the Law, including claims of branches of ICF members established in Member States.
Where IFs have obtained authorisation to operate by another Member State and have established a branch in the Republic, the said branch may voluntarily subscribe to the ICF when the amount and/or extent, including the percentage of the coverage offered by the ICF, exceeds that of the coverage provided in the Member State in which the IF has obtained authorisation to operate, in order to complete the coverage already enjoyed by the investors of the branch as a result of its participation in the compensation system of its Member State of origin.
In the cases of voluntary subscription to the ICF of branches established in the Republic by IFs which have obtained an authorisation to operate by other Member States, the ICF shall complete the coverage for the covered clients of the said branches.
The ICF does not cover the applicants set out in the Second Schedule of the Directive, as well as applicants who may be covered but who apply to the ICF for compensation, in respect of claims against an ICF member who was a member of the ICF in relation to the covered services, after one year from the loss of membership status has elapsed.
Determination of the amount of compensation payable
The calculation of the compensation payable arises from the sum of the total established claims of the covered client against the ICF member, arising from all covered services provided by the member and regardless of the number of accounts of which it is the beneficiary, the currency and place where such services were provided within the European Union.
The ICF provides coverage for the claims referred to in Paragraph 19 of the Directive, which refers to the total claims of the covered client against a Fund member and is defined as the lower of 90% of the cumulative covered claims of the covered client and €20,000.
In the case of joint investment business in the calculation of the coverage, the share attributable to each covered investor is taken into account. The claims are allocated equally amongst covered investors, unless special provisions exist, and each investor is provided with separate coverage up to the limits of subparagraph (2) of Article 25 of the Directive.
