Investor’s Compensation Fund
The Investors’ Compensation Fund covers customer’s financial assets and instruments held with banks, investment firms and fund management companies providing asset management services (hereafter service providers). If the service provider cannot fulfil its obligations due to permanent payment difficulties, the Fund pays a maximum compensation of EUR 20,000 to non-professional investors.
The compensation does not apply to losses arising from securities price changes or service provider’s bad advice. Such losses are always the customer’s own liability.
The Fund does not cover mutual fund activities and investment-linked insurances or deposits.
The Fund does not cover securities trading, investment advice or arrangement of multilateral trading if the service provider does not hold the customer’s assets.
Level of compensation
The maximum level of compensation to be paid to one investor on claim from one service provider is EUR 20,000. The compensation is calculated so that the Fund is liable for 90% of the claim and customer for 10%.
Hence, a full compensation requires a claim of approximately EUR 22,200 from the service provider.
Exception: For banks belonging to the amalgamation of cooperative banks, the maximum level of compensation is EUR 20,000 even if a customer has financial assets/instruments in more than one bank in the amalgamation.
Who is entitled to compensation?
The Investors’ Compensation Fund only provides protection for non-professional investors, which generally means private persons. Professional investors are companies of certain size and institutional investors. A private person cannot be a professional investor unless notified as such by the person themself.
Deposit banks and investment firms in the compensation scheme
All deposit banks providing investment services, investment firms and fund management companies providing asset management services to customers are members of the Investors’ Compensation Fund.
When is the compensation paid?
If a service provider runs into permanent payment difficulties, FIN-FSA must decide within 21 working days whether the Investors’ Compensation Fund is liable to compensate the customer. Compensation must be paid to the customer within three months from such decision. FIN-FSA may, on special grounds, grant an extension of no more than three months for the payment of investments. Hence, compensation must be paid within a maximum of six months from FIN-FSA’s decision.
Investor compensation and EEA service providers
All EU countries and countries belonging to the European Economic Area (EEA) must have an investor compensation scheme providing protection to a minimum amount of EUR 20,000. The level and scope of protection can vary across countries.
Branches of service providers operating in Finland are subject to compensation rules applied in the country where the service provider has its head office (home country).
Investor compensation and non-EEA service providers
Customers of service providers established in non-EEA countries are subject to compensation rules applied in the country where the service provider has its head office. These rules can differ from those applied in the EU and EEA. Customers are advised to ascertain the protection scheme applied to the service provider.
24 October 2011