In this section are listed questions and answers in context of fund’s activity, the right of compensation and etc.

 

І. How does the Investor Compensation fund raise funds to pay out compensation?

The ways to raise funds are:

Initial payment is calculated as one per cent of the minimum required capital for licensed investment intermediaries and it’s paid on joining the scheme.

Annual contributions which are determined by the Management Board of the ICF. The maximum level of the annual contribution, according to the law, is as follows:

  • Up to 0,5 % of the total amount of the cash; and
  • Up to 0,1 % of the total amount of the other clients’ assets for the preceding year.

The amount of the cash and the financial instruments is determined on average monthly basis.

Other ways to raise funds are:

  • proceeds from investment of the resources raised by the Fund;
  • proceeds received by the Fund from the investment intermediaries’ property in case when the Fund has entered into the rights of the clients of an investment intermediary to the extent of the paid compensation;
  • other sources such as loans, donations, foreign assistance. More information about the Fund’s activity you may find out  here.

 

ІІ. Cases of compensation payment.

1. In which cases do the clients of an investment intermediary receive compensation from the Fund?

The Fund provides compensation in case when an investment intermediary is not able to pay out its liabilities to its clients due to reasons directly related to its financial state.

2. How will the investor find out that he is liable to compensation by the Fund?

  • The investment intermediary is obliged to inform its clients for the existing investor compensation scheme as well as for its scope and level of compensation. On demand it should also provide information regarding the circumstances 3 and procedures of compensation payment.
  • When there are circumstances for paying out compensation, the Fund publishes an announcement at least in two national daily newspapers about the period during which the eligible investors can submit their claims for compensation as well as about the bank that will make the payments.

3. Are the clients of all investment intermediaries liable to compensation?

The right to receive compensation by the Fund belongs to the clients of all investment intermediaries which got a license by the Financial Supervision Commission to provide investment services in accordance with   Art. 5, para 2 and 3 of Law on Markets in Financial Instruments (LMFI), as well as the clients of banks, whose license includes providing investment services.

Eligible to receive compensation are also the clients of asset management companies, whose license includes management of individual investment portfolio in accordance with Art. 86, para 2, item 1 of the Law on activity of undertakings for collective investments and other collective investments companies, when there is a concluded contract for individual portfolio management.

Non-eligible to compensation clients of investment intermediaries, commercial banks and asset management companies are given in  Art. 77d, para 2 of the LPOS.

4. Which claims are not liable to compensation?

The Fund does not pay compensation to claims arisen out of and/or related to deals and actions, defined as “money laundering” within the meaning of Art. 2 of the Law on Measures against Money Laundering, if the offender has been convicted and the sentence is effective as well as to claims of individuals defined under the Art. 77d, para 2 of the LPOS.

5. What should a client of investment intermediary do when there are circumstances for paying out compensation?

Within the period of one year since publishing the announcement about starting a compensation payout, a written claim has to be submitted to the Fund.

6. Within what time should the client receive the due compensation?

The Fund’s MB in coordination with the failed intermediary’s Assignee considers the grounds for compensation, determines the amount of the receivables and pays out the claim no later than three months after the grounds for compensation have been found out.

In certain circumstances the deadline for paying compensation can be prolonged by no more than three months but it should be approved by the Financial Supervision Commission.

7. What is the prescriptive period for receiving compensation?

The right to compensation elapses one year after publishing the Fund’s announcement with the exception of cases where due to unforeseen circumstances the deadline is not observed.

8. Should the client prove his/her rights to receive compensation?

Yes. That should be done by filling out the compensation claim. The appointed Assignee of the failed investment intermediary compares the claims with the accounting records and with the documentation of the intermediary. In order to prevent abuses it is recommended that investors keep all portfolio statements issued by the investment intermediary.

 

ІІІ. Which clients’ assets are eligible to compensation?

1. What does the definition “clients’ assets” include?

Clients’ assets are the money, the financial instruments and the other financial assets of the clients which the investment intermediary holds, administers or manages on behalf of the clients in connection with investment services it provides under  Art. 5 para 2 and 3 of the LMFI including interest, dividends and other similar payments. The clients’ assets managed by banks do not include the deposits within the meaning of § 1, item 1 of the Additional Provision of the Bank Deposits Guarantee Act.

2. Are the clients’ assets managed by branches of foreign investment intermediaries eligible to compensation?

Yes, the Fund provides compensation to:

– the clients of investment intermediaries from a third country, which are licensed by the Financial Supervision Commission giving them the right to provide investment services under  Art. 5 para. 2 and 3 of the LMFI in the Republic of Bulgaria, in the cases when in the Home State there isn’t any acting investor compensation scheme or it does not cover the investment intermediary’s branches abroad.

– the clients of investment intermediaries from a third country, which are licensed by the Financial Supervision Commission to provide investment services under Art. 5 para 2 and 3 of the LMFI in the Republic of Bulgaria, in the cases where the Bulgarian investor compensation scheme povides higher level or wider scope of compensation than the ones provided by the home state compensation scheme.

– the clients of investment intermediaries from a member-state which provides investment services under Art. 5 para 2 and (3) of the LMFI in Bulgaria via branch in cases where the Fund provides higher level or wider scope of compensation than the ones provided by the investor compensation scheme in the home member-state.

3. What will happen if an investment intermediary which manages clients’ assets merge in another intermediary?

In a case of a merger or takeover involving two or more investment intermediaries clients’ assets which belong to the same person are held in individual accounts for a period of six months. After the six months period the accounts are pooled in one account.

4. How is the compensation of a client who holds different types of assets in one investment intermediary determined?

The amount of the compensation is determined by summing up all client’s receivables from the investment intermediary, irrespective of their number and of the place where they are set up.

5. If the client’s assets (money or financial instruments) are in foreign currency, how is the compensation paid out?

In cases where a client holds money in foreign currency, the amount of the compensation is calculated in BGN in accordance with the exchange rate of the Bulgarian National Bank as of the date of the decision under  Art. 77b, para 1 of the LPOS. In cases when a client holds financial instruments in foreign currency their price is taken into consideration as of the date of the decision under  Art. 77b, para 1 from the LPOS, and the client is paid compensation for the sum of his receivables calculated in BGN in accordance with the exchange rate of the Bulgarian National Bank as of the same date.

6. Whom and how is compensation paid out if the clients’ assets belong to more than one person?

In the cases where the client assets belong to more than one person, each person’s portion is taken into account in establishing the total amount of his receivables from the investment intermediary. Unless otherwise provided for, it is assumed that the clients’ portions are equal.

7. Whom and how is compensation paid out if the client of the investment intermediary has acted for someone else’s account?

In the cases where the investment intermediary’s client has acted for someone else’s account, the compensation is paid to the person, for whose account the client has acted, provided that this person is or may be identified before the date of the decision under Art. 77b, para 1 of the LPOS.

If the investment intermediary’s client has acted for the account of two or more persons, the compensation is paid as described in the previous question.

8. Is compensation paid out if the clients’ assets are encumbered?

Clients’ assets which are encumbered or serve as collateral, are included in determining the amount of the compensation, as the relevant compensation due on the clients’ assets is not paid to the titleholder until such encumbrance has been lifted. If there is an effective judicial document issued by a judicial authority in respects of encumbered clients’ assets referred, the Fund pays the compensation to the person, indicated in the act as having the right to receive compensation.

9. Is compensation paid to clients who have origin or citizenship different than the Bulgarian one?

The compensation provided by the Fund does not depend on the citizenship or the origin of the investor as far as he is a client of an investment intermediary which is a participant in the Fund.