Who are not covered by the ICF(Investor Compensation Fund) of CySEC Brokers?

May 18, 2016

Compensation Fund for Clients of a CySEC regulated Online Broker

Many of the CySEC regulated Online Brokers are members of the Investor Compensation Fund, set up by the Central Bank of Cyprus and the Cyprus Securities and Exchange Commission (CySec) for all clients of Cyprus Investment Firms.

The purpose of the Investor Compensation Fund is to secure the claims of all covered clients, in this case retail clients, through the payment of compensation where the investment firm is unable to:

a) return client funds owed to them or funds which are held, directly or indirectly, in context of providing investment services or b) to hand over to covered clients financial instruments which belong to them which the investment firm holds, manages or keeps on their account.

This ensures that the clients of a CySEC regulated Online Broker can claim compensation in the event that a CySEC regulated Online Broker is unable to fulfil its obligations and provides the client with a form of insurance for their funds, in the case of insolvency on the part of a CySEC regulated Online Broker or indeed any CIF which is part of the investor compensation fund.

The fund does not cover institutional or professional investors and the total payable compensation to each covered client may not exceed EUR20,000, irrespective of the number of accounts held, currency and place of offering the investment service.

Clients who are NOT covered by the Investor Compensation Fund include:

  1. Institutional and professional investors including:
    1. Investment firms
    2. Entities associated with a CySEC regulated Online Broker and, in general, belonging to the same group of companies
    3. Banks
    4. Cooperative credit institutions
    5. Insurance companies
    6. Collective investment organisations in transferable securities and their management companies
    7. Social insurance institutions and funds
    8. Investors characterised by a CySEC regulated Online Broker as professionals
  2. States and international organizations.
  3. Central, federal, confederate, regional and local administrative authorities.
  4. Enterprises associated with a CySEC regulated Online Broker
  5. All staff of a CySEC regulated Online Broker, inclusive of Managerial and Administration staff a CySEC regulated Online Broker whose participation directly or indirectly in the capital of the member of the Fund amounts to at least 5% of its share capital, or its partners who are personally liable for the obligations of the member of the Fund, as well as persons responsible for the carrying out of the financial audit of the member of the Fund as provided by the Law, such as qualified auditors 6. Investors having an enterprise connected with a CySEC regulated Online Broker and in general of the group of companies to which a CySEC regulated Online Broker belongs, positions or duties corresponding to the ones listed in paragraphs 5 and 6 above
  6. Second-degree relatives and spouses of the persons listed in paragraphs 5, 6 and 7 as well as third parties acting for the account of these persons
  7. Apart from investors convicted of a criminal offence pursuant to the Prevention and Suppression of Money Laundering Activities Law of 1996 – 2000, investor-clients of the Company responsible for facts pertaining to the Company whom have caused its financial difficulties or have contributed to the worsening of its financial situation or whom have profited from these facts
  8. Investors in the form of a company which, due to its size, is not allowed to draw a summary balance sheet in accordance with the Companies Law or a corresponding law of a Member State.

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Hercules