What is the Investors' Compensation Fund?

The Investors’ Compensation Fund has been established to safeguard the claims of investors if a member provider of investment services cannot pay the investors’ claims in accordance with the agreement.

Primarily, the investment firm or the credit institution whose client the investor is liable for the claims of the investor.   

The fund covers, inter alia, the transmission and execution of orders, asset management services and placing of financial instruments.

Unit-linked insurances are not covered by the fund, nor mutual fund activities.

Deposits are covered by either the Deposit Guarantee Fund or the Investors Compensation Fund.

Who are members of the Investors' Compensation Fund?

All Finnish businesses providing investment services, such as investment firms, credit institutions and fund management companies providing asset management services are members of the compensation fund.

Admission fees, annual contribution payments and administrative fees are collected from the members to increase the capital for an eventual compensation event and to cover the administration expenses.

Who will get compensation and what will be compensated from the Fund?

The protection provided by the compensation fund covers all non-professional clients. A private person is not a professional client unless classified by the service provider as a professional client.

 All assets held for the purpose of the client’s investment activities are to be kept separate from the member provider’s own assets and from the assets of other clients as provided in the relevant law.  Consequently, the client’s assets must be available for return without delay whenever the client so requests.

 In unusual situations, the client’s assets may have been mixed with the service provider’s assets or are not for some other reason available for returning to the client without delay.

 If a member of the compensation fund has not returned the investor’s funds in accordance with the agreement, the compensation fund pays compensation for the investor’s funds. Insolvency of a member of the fund is a precondition for compensation.

The fund does not cover losses incurred as a result of e.g. security price fluctuations. The client is always responsible for the consequences of his or her investment decisions.

What is the amount of the compensation?

The compensation to be paid to one investor is 9/10 of the claim the investor has from one service provider, however, no more than €20,000. The compensation is determined upon the market value of the securities at the date on which the Financial Supervision Authority made a decision on compensation liability or on which the service provider was placed into liquidation, began official restructuring proceedings or was declared bankrupt - depending on which date is the earlier.

Because of the restriction, an investor with an estimated claim of €22,222 is entitled to the maximum compensation, i.e. to €20,000, because 90 per cent of €22,222 is €20,000. An investor with a claim of €20,000 would get compensated for €18,000. An investor, whose claim from an investment firm is more than €22,222, would also get a compensation of €20,000.

How to claim compensation?

An investor may claim compensation by notifying the Financial Supervision Authority of the claim.

The Financial Supervision Authority decides within 21 days from receiving the notification whether the compensation fund is liable to pay the claims of the investor. A precondition for the compensation is that the non-performance of the claim has resulted from the permanent insolvency of a service provider.

No compensation may be claimed if the service provider has failed to return an individual customer’s assets in a situation where no insolvency is involved.  Neither may compensation be claimed in a temporary situation where return of the assets is delayed by a strike, technical problems or other reasons treated as force majeure.

In order to make a compensation decision, a service provider has to submit to the Financial Supervision Authority and to the compensation fund the information on all investors and their claims.

The Financial Supervision Authority informs the compensation fund and the service provider about its decision. If the service provider has a branch abroad, local supervision authorities and the corresponding investors’ compensation scheme are also informed about the decision.

When the compensation is paid

The compensation fund has to pay the claims of an investor without undue delay, within three months from the decision of the Financial Supervision Authority at the latest. If a member of the compensation fund has been placed into liquidation, began official restructuring proceedings or declared bankrupt, the time limit is calculated from the court’s decision.

Upon special grounds, the Financial Supervision Authority may grant the compensation fund an extension of the time limit not exceeding three months, for paying the claims of investors. Despite the extension, the compensation fund has to, however, pay the compensation if the delay in payment of the compensation was unreasonable, for instance if the investor’s livelihood depended on it.

Compensation Non-professional clients Clear and indisputable claims Investor’s assets have not been returned The service provider is permanently insolvent  No compensation  Professional clients Unit-linked insurances Losses on assets held for investment activities.

What do the assets of the
Compensation Fund consist of?

Legislation aims to ensure that the Investor’s Compensation Fund has adequate capital to pay compensation. A minimum capital provided by law is €12 million. Should the assets not suffice to compensate the investors, the compensation fund may finance its operations by taking out a loan.

Administration of the Investors' Compensation Fund

A delegation elected by the members of the fund and a board of directors elected by the delegation administer the compensation fund and its operations. The board of directors may appoint a representative for the fund.

The delegation’s duty is to supervise that the fund is managed in accordance with the law and the rules of the fund as well as with the provisions and decisions issued by authorities.

Different kind of investment firms and credit institutions are represented in the board of directors. The board of directors represent the compensation fund and manages its operations. A representative appointed by the board of directors is responsible for the day-to-day matters of the fund.

The compensation fund has an authorised public accountant. The Financial Supervision Authority supervises the operations of the fund.