The FinancialClients of firms no longer covered by CySEC’s safeguarding program are still eligible for protection under the Investor Compensation Fund (ICF). This fund aims to secure the claims of eligible clients and provides compensation if a member fails to meet its financial commitments.
Cyprus’s leading regulatory body has clarified that “under paragraph 6(3) of the Directive, losing ICF membership does not equate to losing the right to compensation for investment activities conducted prior to the membership termination, provided the conditions outlined in the Directive are met. This also does not prevent the start of the compensation process for eligible clients.”
This development follows the CySEC’s decision to withdraw the Cyprus Investment Firm authorization from Leverate Financial Services, which had voluntarily surrendered its CIF license in December 2023.
What’s Next?
Following the revocation of a firm’s authorization, the regulator typically initiates the compensation payment process for companies unlikely to fulfill their financial obligations soon.
The subsequent steps involve the ICF calling on eligible clients to submit their claims against the implicated firms, outlining the application process for compensation, and setting a deadline for submissions. The fund will also publicize these details in at least two local newspapers and provide information on how investors can stay updated on the status of their applications.
The compensation each client receives is determined based on the contractual terms of their relationship with the failing broker. Generally, the maximum compensation amount is capped at €20,000.