Changes in the conditions of the compensation fund in Cyprus (ICF CySEC)

The Cypriot financial market surveillance institution, CySEC, has amended the regulations governing the operation of the compensation fund (ICF), which secures the interests of retail investors. The update of the conditions is to lead to maintaining a proper level of trust and better protection of investors.

What is ICF

The Investor Compensation Fund (ICF) is a fund created for clients using the services of investment companies, other than credit institutions, operating under the CySEC regulations. In its main assumption, it is to secure clients' funds covered by ICF protection by paying compensation up to the amount of 20 000 EUR in the event of pre-existing conditions specified in a special directive.

In the opinion of the Cypriot regulator, it is time to introduce an amendment to the existing regulations.

Demetra Kalogerou, chairwoman of CySEC:

The improved regulatory framework for the investor compensation fund provides for a balanced, proportionate and risk-based approach to determining the level of contributions required by member companies. The ICF's solidity is essential to maintaining trust and ultimately investor protection. Our thorough consultations and the resulting changes will help ensure that it is a well-funded and resilient mechanism to support compensation for eligible investors in the event of market failure.

Amendments to the Cypriot compensation fund

The new guidelines require fund members to operate an independently controlled minimum monetary buffer. It will amount to 3 XNUMX of qualified funds and financial instruments of its clients.

Another change is the abolition of restrictions on potential, extraordinary contributions from ICF members in the event of the ICF having to pay compensation as a result of bankruptcy of the entity supervised by CySEC.

An unfavorable novelty (for entities operating or wanting to operate in Cyprus) is the introduction of the necessity to pay the first contribution to the ICF fund before receiving the permit to start operations, or before continuing the consent to its continuation.

The so-called discretion, which is enshrined in Directive 97/9 / EC of the European Parliament and of the Council with regard to the levels of investor compensation. It provides for the possibility of paying compensation up to a limit of EUR 20, or 000% of the value of the claims of an aggrieved investor who was covered by the guarantee fund, where the lower amount will be paid.

CySEC directive on ICF