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Investor Compensation Fund − (ICF)

Stocks Forex AF Ltd. is an investment firm regulated by the Cyprus Securities and Exchange Commission with license number 283/15. Pursuant to section 17 of the Investment Services and Activities and Regulated Markets Law of 2007 (the “Law”), a Cypriot Investment Firm (“CIF”) must be a member of the Investor Compensation Fund (“ICF”). According to section 58 of the Law, a CIF is not allowed to provide investment services without participating in the Investor Compensation Fund.

The Fund was established under the Investment Firms (IF) Law 2002 as amended (and the Establishment and Operation of an Investor Compensation Fund for customers of CIFs Regulations of 2004 (“the Regulations”) which were issued under the Law.

The object of the Fund is to secure the claims of covered clients against the members of the Fund by payment of compensation for their claims arising from the covered services provided by its members as long as failure by the member to fulfil its obligations has been ascertained.

It is noted that failure by a member of the Fund to fulfill its obligations consists of its failure:

  • Either to return to its covered clients funds owed to them or funds which belong to them but are held by the member, directly or indirectly, in the framework of the provision by the said member to the said clients of covered services, and which the latter requested the member to return, in exercise of their relevant right
  • Or to hand over to the covered clients financial instruments which belong to them and which the member of the Fund holds, manages or keeps on their account, including the case where the member is responsible for the administrative management of the said financial instruments.

Covered Services

Covered Services are the investment services listed on the Company’s license, issued by CySEC

The Fund does not compensate the following categories of Investors:

  1. Institutional and professional investors including:
    • Investment firms
    • Entities associated with the Company and, in general, belonging to the same group of companies
    • Banks
    • Cooperative credit institutions
    • Insurance companies
    • Collective investment organisations in transferable securities and their management companies
    • Social insurance institutions and funds
    • Investors characterised by the Company as professionals
  2. States and international organisations
  3. Central, federal, confederate, regional and local administrative authorities
  4. Enterprises associated with the Company
  5. All staff of the Company, inclusive of managerial and administration staff
  6. Shareholders of the Company whose participation directly or indirectly in the capital of the member of the fund amounts at least 5% of its share capital, or its partners who are personally liable for the obligations of the member of the Fund, as well as persons responsible for the carrying out of the financial audit of the member of the fund as provided by the Law, such as qualified auditors
  7. Investors having an enterprise connected with the Company and in general of the group of companies to which the Company belongs, positions or duties corresponding to the ones listed in paragraph 5 and 6 above
  8. Second –degree relatives and spouses of the persons listed in paragraphs 5,6 and 7 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 Company or who have contributed to the worsening of the Company’s financial situation or who have profited from these facts
  10. Investors in the form of a company, which due to its size, is not allowed to draw a summary balance sheet in accordance with the Companies Law or corresponding law of a Member State

PREREQUISITES FOR INITIATING THE COMPENSATION PAYMENT PROCEDURE

The Fund initiates the compensation payment procedure:

  • If the member of the Fund submits to the Fund or to Cyprus Securities and Exchange Commis-sion CySEC a written statement declaring its failure to fulfill its obligations toward its clients
  • If the member of the Fund files an application for liquidation
  • If (CySEC) has revoked or suspended the member’s authorization to provide investment ser-vices and ascertains that the member of the Fund is not expected to be in a position to fulfill its obligations toward its clients in the near future, for reasons which do not concern a temporary lack of liquidity which can be dealt with immediately.

CySEC may request by the member of the Fund to set out its views within a short deadline so fixed, which cannot be less than three working days from the date of the invitation to set out such views. Upon issuance of a decision by the Cyprus Securities and Exchange Commission or by the Court in accordance with paragraph (1) or (2) above respectively, on the commencement of the compensation payment procedure, the Fund publishes in at least three national newspapers an invitation to the covered clients to make their claims against the member arising from covered services, designating the procedure for the submission of the relevant applications, the deadline for their submission and their content. The publication contains at least:

  • the name and address of the headquarters of the member of the Fund, to whom the covered cli-ent compensation process has been activated through the Fund
  • the deadline for the submission of compensation applications, which cannot be less than five months and greater than nine months from the last publication
  • the mode and address of submission of applications • the address at which investors may be informed about the exact content of the applications to be submitted, and get the relevant form provided by the Fund.

Interruption of deadline for submission of applications

In case a covered client, not being its fault, was neither informed about the invitation to submit compensation applications nor in a position to submit within the deadline this application, the dead-line is interrupted provided that an interruption of the deadline arises in case of an event of force majeure, as long as it has been proved that it prevented the keeping of the deadline for the submis-sion of compensation applications or the collection and submission of the required information.

Indications that the covered client has an impediment for which he is not responsible and which forms a reason for the interruption of the deadline for the submission of a compensation application include especially

  • proved absence of the covered client abroad for a period which includes at least half of the deadline for the submission of a timely application;
  • illness confirmed by a doctor that it forms a serious impediment for the submission of an appli-cation for a period which includes at least half of the deadline for the submission of a timely ap-plication; or
  • his stay in a correctional institution for a period which includes at least half of the deadline for the submission of a timely application.

A covered client who submits an application late to the Fund for the payment of compensation is obliged to submit, in addition to the information forming the necessary minimum content of the ap-plication a solemn declaration stating the reason for which he was not in a position to claim com-pensation in time attaching the necessary supporting evidence to prove his allegations.

CONTENT OF COMPENSATION APPLICATIONS

Applications must be made in writing and they must include:

  1. The name of the claimant
  2. The address, telephone and fax numbers as well as any email address of the claimant
  3. The client code that the claimant had for the member of the Fund
  4. The particulars of the covered services agreement between the Fund and the claimant
  5. The type and amount of the alleged claims of the claimant
  6. The particulars from which the alleged claims of the claimant and their amount are derived.

In the newspaper publications the Fund may ask for further information to be included in the compensation application.

Procedure relating to the recording and evaluation of the alleged compensation claims

The Fund designates at least one qualified auditor and at least one lawyer with knowledge on capital market issues, who after having checked initially the prerequisites, they evaluate the claims submitted to the Fund and recommend to the Administrative Committee their acceptance in total or in part or their rejection. In case of disagreement between these persons, each one them submits a separate recommendation. The remuneration of the persons is agreed between the Fund and these persons and burdens the member of the Fund, and, if necessary, is paid by the Fund.

The persons in order to evaluate the applications:

  • ask from the member of the Fund to express its opinion about the grounds of the claims alleged by the claimants and, in case of doubt, to present the relevant supporting documents;
  • evaluate, based on the information they have, the applications, determining the amount of the compensation for each claimant.

The persons have full access to the books kept by the member of the Fund, in order to accomplish their work, and they are obliged to exhibit confidentiality against any third party as to the infor-mation coming to their knowledge in the exercise of their duties provided that the said obligation of confidentiality is disregarded in order to render possible the exercise of their duties.

EVALUATING THE ALLEGED COMPENSATION CLAIM

The Administrative Committee will take control if:

  1. The claimant falls within the category of covered clients
  2. The application was timely submitted;
  3. The claimant has not been convicted of a criminal offence pursuant to the Prevention and Suppression of Money Laundering Activities of 2007
  4. The conditions of the Law and of the Directive for the valid submission of compensation applications are fulfilled.

If the above conditions are not fulfilled or if one of the following reasons exists then the Administrative Committee will reject the application:

  1. The claimant used fraudulent means in order to secure the payment of compensation by the Fund, especially if it knowingly submitted false evidence;
  2. The damage suffered by the claimant substantially derived from concurrent negligence or offence on its behalf in relation to the damage it suffered and to its underlying cause

The Administrative Committee during the examination of the applications takes into consideration the recommendations of the persons and decides on the applications submitted to the Fund determining the amount of the compensations for each covered client-claimant.

Unjustifiably paid compensation

The Fund may demand at any time from a covered client to return the compensation paid to it, if it finds out a posteriori that there was a reason to reject its application.

Fixing of the amount of payable compensation

To ascertain the claims of a claimant against a member of the Fund, as well as any counterclaims of the member of the Fund against the claimant, the books kept and the particulars issued by the member of the Fund as well as the supporting evidence produced by the claimant are taken into consideration.

The amount of the compensation payable to each covered client is calculated in accordance with the legal and contractual terms governing the relation of the covered client with the member of the Fund, subject to the set-off rules applied for the calculation of the claims between the covered client and the member of the Fund.

The valuation of the financial instruments pertaining to the compensation payable to the covered client is carried out based on their value at the day:

  • of publication of the court
  • of publication of the decision of CySEC.

The calculation of the payable compensation derives from the sum of total established claims of the covered client against the member of the Fund, arising from all covered services provided by the member and regardless of the number of accounts, of which it is a beneficiary, the currency and place of provision of these services.

AMOUNT OF COMPENSATION

The Company’s books will be used together with supporting evidence to ascertain the claims of member and the amount payable will be calculated in accordance with the legal and contractual terms governing the relation of the client with the member of the fund subject to set-off rules. The calculation of compensation payable will derive from the sum of the total established claims of the covered client arising from all covered services provided, despite of the number of accounts of which it is a beneficiary, the currency and the place of provision of these services. If the claim exceeds €20,000 then the claimant is only entitled to receive a maximum of the equivalent of €20,000. The investment firm providing services to its customers through the branch situated in a third country, the amount of maximum compensation payable to the customers of the said branch comes up, per customer, to the lump sum paid by any investor compensation scheme in operation in the third country, without however the amount exceeding the amount of €20,000.

Upon completion of the valuation, the Fund

  1. issues minutes listing the clients of the member who are entitled to compensation, along with the amount of money each one of them is entitled to receive and communicates it to the Cyprus Securities and Exchange Commission and the member within five working days from its issue and
  2. communicates to each affected client its finding no later than fifteen days from the issue of the minutes, determining the total compensation amount this client is entitled to receive.

CySEC, in order to ensure that the provisions of the legislation in force in the Republic are fulfilled during the examination of the applications and the calculation of the amount of the corresponding compensation per covered client, may:

  • request from the Fund, the member of the Fund and the claimant to produce information and particulars
  • run any investigation required, implementing the relevant provisions of CySEC (Establishment and Responsibilities) Laws of 2001 and 2002, as in force, and especially those provisions enact-ing the powers of the CySEC for entry and investigation.

The claimant, to whom the Fund communicates the total compensation amount to which he is entitled, in case he disagrees with the Fund’s decision, has the right within ten days from the communication of the decision to appeal to the Cyprus Securities and Exchange Commission, justifying sufficiently his alleged claim.

The Fund is obliged to pay to each covered client – claimant the compensation within three months from sending to the Cyprus Securities and Exchange Commission the minutes with the compensation beneficiaries. The payment of the compensation by the Fund is deposited to a bank account of the covered client-claimant designated by the latter in writing to the Fund.

Every compensation payable to a covered client burdens initially the property of the Fund corresponding to the individual shares of its members and then the assets of the fixed reserve.

The payment of any compensation by the Fund entails ipso jure subrogation of the Fund to the rights of the compensated covered client-claimant against the member of the Fund for an amount equal to the compensation payable to it.