CySEC introduces changes to Investor Compensation Fund framework

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Under the modifications, any provisions in connection with limiting or refunding the gifts of those members that are going to be paid into the ICF Agree to the New ICF Directive is going to be removed.

There will not be any limiting of possible extraordinary gifts by an ICF member in the event of a negative scenario which demands the ICF to fund compensation as a result of investors, should the vital requirements be fulfilled.

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ICF members will be required to maintain a independently audited and client-segregated minimum cash buffer of 3‰ (3 per 1,000) in their customers’ eligible funds and fiscal instruments.
It’d be intriguing to check if the ICF would actually assist traders. Certain Cypriot institutions which officially aim to assist customers of financial services firms have been pretty awkward.
Under the revised legal framework, an annual registration fee for ICF members to pay the minimal cost of the ICF’s operation will be released, so the ICF is in a position to pay contingent expenses which will surface, such as the price incurred because of the collecting, recording and assessing the claims of insured investors, even in the event that the compensation procedure for a massive manhood (e.g. a part with thousands of investors) is activated.
The reforms aim to make sure the ICF secures the promises of insured clients of controlled entities who are fully registered members of the ICF in case of a negative situation without disturbing market equilibrium. The obligation to participate in the ICF applies to all entities offering investment solutions and ancillary custody solutions irrespective of whether clients’ funds and fiscal tools are held.

The publication of this Policy Statement happens nearly two decades after the Cypriot regulator issued a consultation paper about the proposed alterations to this legal framework.
The reforms envisage computing members’ annual ICF contributions utilizing a risk-based approach, that takes into account the reliability of announcements of eligible funds and financial instruments, the amount of customers’ qualified funds and financial instruments of a specific member along with the timing of their payment of the yearly contribution.
In addition, the payment of initial contributions might need to be made with candidate members or existing members prior to acquiring an authorisation to function and/or prior to extending their authorisation to operate — but just after the core standards for granting authorization by CySEC was analyzed and upon receiving applicable approval instructions by CySEC.

The rules enforce the discretion provided for in Directive 97/9/EC about the levels of investor compensation such that the maximum limit of compensation policy equals $20,000 or even 90 percent of the insured investor’s claim, whichever is lower.