INVESTOR COMPENSATION FUND - CYSEC REGULATION
OBJECT OF THE FUND
The primary object of the Investor Compensation Fund (the “Fund”) is the safeguarding of investors’ claims against companies providing investment services which are members of the Fund (“Fund member”) and which are unable to satisfy its obligations against the investors that arise from the agreement between the Fund member and its client or, by legislation or, from the Fund member’s wrongdoing.
XFR FINANCIAL Limited, following the granting of its license, as required by the Law, has become a member of the Fund and in effect its users/clients are protected as provided herein (please refer to the paragraph below “Who is Covered?”)
Accordingly, a failure to satisfy the obligations owed by the Fund member to its investors must be ascertained prior to making a claim from the Fund and, shall indicate the inability of the Fund memberFund member to:
(i) return to its covered customers funds owed to them or funds which belong to them but are held by the Fund memberFund member, directly or indirectly, in the context of the provision by the Fund memberFund member to the said customers of covered services, and which the latter requested the Fund memberFund member to return, in exercising their relevant right; or
(ii) return to its covered customers financial instruments which belong to them and which the Fund member holds, manages or keeps on their account, including circumstances where the Fund member is responsible for the administrative management of the said financial instruments.
WHAT INVESTMENT SERVICES ARE COVERED BY THE FUND? (the “Covered Services”)
(1) Reception and transmission, on behalf of investors, of orders in relation to one or more of the financial instruments (currency trading and Options to acquire or dispose of any these instruments)
(2) Execution of such orders, as listed in (1), other than for own account.
(3) Dealing in financial instruments for own account.
(4) Managing of investment portfolios in accordance with mandates given by investors on a discretionary, client‐by‐client basis where such portfolios include one or more financial instruments.
(5) Underwriting in respect of issues of one or more of the financial instruments, as well as the noncore service of Safe keeping or administration in relation to one or more of the financial instruments.
WHO IS COVERED BY THE FUND (the “Covered Customer”)
The Fund covers all Users/clients of its members unless they fall within the following categories:-
(1) The following categories of institutional and professional investors:
• Investment Firms,
• Legal entities associated with the Fund member and, in general, belonging to the same group of companies,
• Cooperative credit institutions,
• Insurance companies,
• Collective investment organizations in transferable securities and their management companies, 2010 3
• Social insurance institutions and funds,
• Investors characterized by the Fund member as professionals, upon their request;
(2) States and supranational organizations;
(3) Central, federal, confederate, regional and local administrative authorities;
(4) Enterprises associated with the Fund member. Associated enterprises means undertakings belonging to the same group as well as natural persons who directly or indirectly control that legal person or its parent Fund member, holding a minimum percentage of 20% of the share capital or voting rights;
(5) Managerial and administrative staff of the Fund member;
(6) Shareholders of the Fund member, whose participation directly or indirectly in the capital of the Fund member amounts to at least 5% of its share capital, or its partners who are personally liable for the obligations of the
Fund member, as well as persons responsible for the carrying out of the financial audit of the Fund member as provided by the Law, such as its qualified auditors;
(7) Investors having in enterprises connected with the Fund member and, in general, of the group of companies, to which the Fund member belongs, positions or duties corresponding to the ones listed in paragraphs (5) and (6)above;
(8) Second‐degree relatives and spouses of the persons listed in paragraphs (5) to (7) above, as well as third parties acting for the account of these persons;
(9) Customers who file claims arising out of transactions involving individuals convicted of a criminal offence
pursuant to the Prevention and Suppression of Money Laundering Activities Law or customers responsible for the financial difficulties of the Fund member or who have contributed to the worsening of the Fund member’s financial situation or who have profited from these facts;
(10) Investors in the form of a Fund member, which due to its size, is not allowed to draw a summary balance sheet in accordance with the Companies Law or a corresponding law of a Member State; In the cases of paragraphs (5) to (8) above, the Fund suspends the payment of compensation informing the interested parties accordingly, until it reaches a final decision as to whether such cases apply;
INITIATING THE COMPENSATION PAYMENT PROCEDURE
The Compensation Payment procedure will be commenced by the Fund when at least one of the following preconditions occurs:
(1) the Cyprus Securities and Exchange Commission has determined by Resolution that the Fund member is unable to meet such of its duties as arise from its users/clients’ claims, in connection with the covered services it has provided, given that such inability is related directly to the financial position of the Fund member which indicates that there is no realistic prospect of improvement in the near future, or
(2) a judicial authority, on reasonable grounds directly related to the Fund member’s financial position, has made a ruling that a well founded claim by a user/clients exists or through which the clients’/users’ ability to lodge claims against the Fund member is suspended.
Where one of the above occurs then the Fund publishes in at least three national newspapers an invitation to the covered customers to make their claims against the Fund member arising from covered services, designating the procedure for the submission of the relevant applications, the deadline for their submission and their content.
AMOUNT OF COMPENSATION
The amount payable to the covered customer as compensation is calculated in accordance with the legal and contractual terms governing the relation of the clients with the Fund member, subject to set-off rules. More specifically, the amount of the compensation is the sum of the total of established claims of the covered customer against the Fund member, arising from all covered services provided by the Fund member regardless of the number of accounts of which the covered customer is a beneficiary, the currency and the place of provision of these services.
In the case where the claim exceeds the amount of twenty thousand Euros (€20.000) then the customer will only be entitled to be compensated with an amount of a maximum €20.000. The Fund will inform the Cyprus Securities and Exchange Commission, the member of the Fund and the claimant of the total compensation amount to which he is entitled to receive. In the event that the claimant does not agree with the Fund’s decision, s/he/it has the right, to appeal to the Cyprus Securities and Exchange Commission within 10 days from the communication of the decision, justifying sufficiently his/her/its alleged claim.
The Fund is obliged to pay to each covered customer/claimant the compensation within three months from the communication of its decision to the Cyprus Securities and Exchange Commission. The payment of the compensation by the Fund is deposited to a bank account of the covered customer‐claimant designated by the latter in writing to the Fund.