Information
Information

INVESTOR COMPENSATION FUND (I.C.F)

Information

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(Ι)/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 the clients 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, should it wish, voluntarily subscribe to the ICF when the amount and/or extent, including the percentage of the coverage offered by the ICF, exceeds the amount and/or extent 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, pursuant to the provisions of Directive 87-07, 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 the 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 are provided within the European Union.

The ICF provides coverage for the claims referred to in Paragraph 19 of the Directive, which applies for 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 pursuant to the provisions of subparagraph (2) of Article 25 of the Directive.

Covered claims
The ICF covers claims arising due to a member’s failure to repay the funds owed to covered clients or belonging to them and held on their behalf in connection with investment operations. It also covers claims due to a member’s inability to return to the covered clients any financial instruments belonging to them and held, managed or administered on their behalf in connection with investment operations.

The amount of the claim of a covered client is calculated based on the legal and contractual conditions, in particular those relating to offsetting and counterclaims, that are applicable to the assessment on the date of the initiation of the compensation payment procedure of Paragraph 18(1), of the amount of the funds or value determined with reference to the market value, where possible, of the financial instruments belonging to the covered client and which such funds or instruments, the ICF member fails to repay or return, respectively.

 

Initiation of the compensation payment procedure
The ICF initiates the compensation payment procedure when CySEC has determined that a member appears, for reasons directly related to its financial circumstances, to be unable to meet its obligations arising out of investors' claims or a Court of the Republic, has made a ruling, for the same reasons, which has the effect of suspending investors' ability to make claims against it.

The Commission then issues a decision for the initiation of the compensation payment procedure by the ICF within a reasonable time and publishes the relevant information on its website.

Upon initiation of the compensation payment procedure, the ICF publishes as soon as possible in at least two national newspapers, an invitation to submit applications for compensation, designating the procedure for the submission of the relevant applications, the deadline for their submission, which cannot be lower than five months, as well as their content.

The publication is communicated immediately to the Commission which shall post the publication on its website.

In exceptional and justified cases, the ICF, with an announcement thereof, may extend the deadline for the submission of compensation applications up to three months, provided it obtains the approval of the Commission. The said announcement is published by the ICF in at least two national newspapers, and the Commission shall publish it on its website.

A covered client submitting a compensation application after the deadline, shall submit, in addition to the information forming the content of the application, a declaration explaining the reason, if any, for which he was not in a position to claim the compensation in time, attaching all supporting evidence to that end.

The ICF may record and assess the submitted claims, either internally or by designating at least one expert in capital market issues and at least one lawyer with knowledge on capital market issues, who after initially reviewing the conditions of Paragraph 24, shall evaluate the said applications and recommend to the Administrative Committee their acceptance or rejection, in whole or in part.

These people request from the ICF member to express a justified opinion on the grounds of the claims alleged by the claimants, within a specific time limit, in order to evaluate the applications. They also have full access to the records of the member for which the ICF has been activated, kept electronically or otherwise, in order to carry out their work.

Upon completion of the procedure, the ICF issues a decision, listing the clients of the ICF member, determining the amount of money each one of them is entitled to receive, and communicate it to the Commission and the ICF member within five working days from its

Issue. The said decision, also lists clients to whom no compensation shall be paid, and the reasons for this.

Additionally, the ICF communicates to each affected client its decision the soonest possible from its issue.

The ICF shall pay each covered client/claimant the compensation that he is entitled to, within three months from the date that the decision was communicated to the covered client.


Compensation payment conditions
The payment of compensation by the ICF entails the following:
  • the initiation of the compensation payment procedure;
  • the existence of a valid claim by a covered client against the ICF member, which derives from an investment operation
  • the submission of an application form as prescribed in the Directive 87-07
  • the claims do not arise from transactions for which there has been a criminal conviction for money laundering as defined in the Prevention and Suppression of Money Laundering Activities Law of 2007
  • there are no pending criminal proceedings against the said covered client for money laundering as defined in the Prevention and Suppression of Money Laundering Activities Law of 2007
  • the right of a covered client has not been extinguished under the Limitation of Offenses Act 

How to submit an application
An application to the ICF may be submitted in one of the following two ways:

(a) By filling in the online application form which can be found on the website of CySEC;
(b) By sending a simple letter to the offices of the ICF, accompanied by all supporting evidence.

The letter/application may:
 
(a) be sent by post to the following address:
 
      Investor Compensation Fund(ICF) for IF Clients, 19 Diagorou Str., 1097 Nicosia, Cyprus.
 
(b) be delivered by hand to the offices of the ICF, at the following address:
 
      Investor Compensation ICF for IF Clients, 19 Diagorou Str., 1097 Nicosia, Cyprus.

When submitting an application, make sure to include at least the following information:
 
  • Particulars of the applicant (name, address, Identity Card / Passport No., telephone and fax numbers and email address).
  • The name of the ICF member against which the application is submitted and the client code and/or the applicant’s investment account No.
  • Copy of the covered services agreement between the ICF member and the applicant.
  • The type and amount of alleged claims by the applicant.
  • Copy of the statement of account from the transactions platform that you used.
  • Copy of the statement of deposits and withdrawals from the account held with the ICF member.
  • Copies of documents that prove the applicants’ deposits to the ICF member (e.g. swift transfers, deposit orders, debit advice etc).
  • Description of the facts and evidence giving rise to the alleged claims by the applicant and the amount of such claims with specific references to actions or omissions of the ICF member.
  • Any other evidence or supporting documents to demonstrate that the applicant is entitled to apply for compensation.
  • Reference and copies of any correspondence with the ICF member concerned.
  • Written confirmation that the information included in the application/letter as well as all the documents accompanied are correct and true. 

General Information
Before submitting any application to the ICF, applicants should study the relevant provisions of the Law and the Directive. The existence of a valid claim by the applicant is a basic precondition for receiving a compensation.
 
Finally, the ICF may demand from any applicant to whom compensation was paid to return such compensation, if it establishes a posteriori that there was a reason to reject the application in accordance with the provisions of the Directive.