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?
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?
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?
5. What should a client of investment intermediary do when there are circumstances for paying out compensation?
6. Within what time should the client receive the due compensation?
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?
8. Should the client prove his/her rights to receive compensation?
ІІІ. Which clients’ assets are eligible to compensation?
1. What does the definition “clients’ assets” include?
2. Are the clients’ assets managed by branches of foreign investment intermediaries eligible to compensation?
– 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?
4. How is the compensation of a client who holds different types of assets in one investment intermediary determined?
5. If the client’s assets (money or financial instruments) are in foreign currency, how is the compensation paid out?
6. Whom and how is compensation paid out if the clients’ assets belong to more than one person?
7. Whom and how is compensation paid out if the client of the investment intermediary has acted for someone else’s account?
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.