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Purpose
Pursuant to
section 17 of the Investment Services and Activities and Regulated Markets
Law of 2007 (‘the Law’), “A Cypriot Investment Firm (‘CIF’) must be a
member of the Investment Compensation Fund (‘ICF’)”. According to
section 58 of the Law, a CIF is not allowed to provide investment services
without participating in the Investors Compensation Funds.
The main purpose
of the Investor Compensation Fund for clients of Cypriot Investment Firms
is to secure the claims of the “Covered” clients against Cypriot
Investment Firms, in situations where the latter is unable to meet such of
its duties as arise from its clients’ claims in connection with the
investment services or the ancillary services it has provided, as long as
such inability is directly related to its financial circumstances in
respect of which no realistic improvement in the near future seems
foreseeable.
The Fund
compensates the covered clients for claims arising from the covered
services provided by its members, so long as failure by the member to
fulfill its obligations has been ascertained. Failure by a member to
fulfill its obligations consists of its failure to:
(a) Either to return to its covered clients funds owed to
them or funds which belong to them but are held by the member, directly or
indirectly, in the framework of the provision by the said member to the
said clients of covered services, and which the latter requested the
member to returns, in exercise of their relevant
right;
(b) Or to hand over the covered clients’ financial
instruments which belong to them and which the member of the Funds holds,
manages or keeps on their account, including the case where the member is
responsible for the administrative management of the said financial
instruments.
Management of the ICF
In accordance to Section 60 of the Law, the
management of the ICF, which includes their administration and
representation, is exercised by an Administrative Committee consisting of
five members, who must be of acknowledged authority and morals and have
the necessary knowledge on financial or accounting or bank issues or
issues of the capital market to discharge their duty.
Which clients are Covered?
ICF protects all clients of the CIF, except
clients listed under the Law, Second Appendix (section 2),
particularly:
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Credit institutions;
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IFs;
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Other authorized or regulated financial
institutions;
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Insurance undertakings;
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Collective investment schemes and management
companies of such schemes;
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Pension funds and management companies of such
funds;
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Commodity and commodity derivatives dealers;
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Locals;
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Other institutional investors;
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Large undertakings meeting TWO of the following size
requirements, on a proportional basis:
- Balance sheet total at least 20 000 000 euro
- Net turnover at least 40 000 000 euro
- Own funds at least 2 000 000 euro
- National and regional governments , public bodies
that manage public debt, central banks, international and supranational
institutions such as the World Bank, the Internal Monetary Fund, the
European Central Bank, the European Investment Bank
and other similar international organizations;
- Other institutional investors whose main activity is
to invest in financial instruments, including entities dedicated to the
securitization of assets or other financing transactions;
- Administrative officers and directors of Ifs and
persons closely linked
- Undertakings connected to any IF which has become
insolvent.
Which services are Covered?
ICF shall compensate all clients of any of its members
established in the Republic in respect of claims arising out of the
investment services they provide as well as ancillary services. ICF shall pay no compensation in
respect of claims arising out of transactions involving individuals
convicted of a criminal offence pursuant to the Prevention and Suppression
of Money Laundering Activities Law.
Amount of Compensation
In accordance with Article 56 of the Investment Firms
(IF) Laws of 2002 to (No.2) of 2004, the compensation shall be of an
amount of up to Twenty Thousand Euro (20.000). “Such compensation shall
apply to the investor’s aggregate claims as against a member of an ICF,
irrespective of the number of accounts held, the currency and location of
the provision of service”,
Note: The Establishment and Operation
of the Investor Compensation Fund for Clients of IF’s that were issued
pursuant to the Investment Firms (Ifs) Law, remain in force until they are
replaced pursuant to the new Law.
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