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FAQ - Investor Compensation Scheme

1. How do you decide whether the losses I am claiming are covered?
We have to check carefully every claim for compensation and ensure that every claim is covered by the regulations before we can deal with it. If you are not eligible for compensation under the regulations, we will write to you and explain why.

2. Does the scheme cover losses caused by bad advice?
The scheme does not cover losses caused by bad advice or poor investment management.

3. Does compensation cover investment losses arising from market fluctuations?
The Scheme does not compensate losses caused by market fluctuations in the value of investments. So there is no cover for a downturn in the market, nor for any losses caused by inflation. These economic effects are beyond the control of the intermediaries.

4. Will I be covered if I did business through the lnternet?
Business carried on through the Internet may only be covered if the firm you are dealing with is a licensed intermediary.

5. Does the Scheme cover companies as well as individuals?
Most investors and types of investments are covered. There are however some investors who might not be able to claim. Companies which are permitted to draw up abridged balance sheets in terms of the Companies Act are also covered by the Scheme.

6. Do you cover bank deposits?
Bank deposits are not legally defined as investments and are not covered by this Scheme. They may however be eligible to protection under a different arrangement, namely the Depositor Guarantee Scheme.

7. Will I be covered if a licensed investment firm refuses to hand over any monies because of some dispute with me?
Compensation is not triggered if a licensed firm could hand over the monies to you but is refusing to do so for reasons unconnected with its adverse financial circumstances. So the Investor Compensation Scheme will not cover such claims.
8. What happens if the licensed investment firm holds specific investment instruments or other assets which belong to me?
The Scheme covers not only the repayment of monies owed to you. It is also required to return any investments or assets which are held on your behalf by a licensed firm, or, where this is not possible, to pay compensation on the basis of their value.

9. How does the Scheme obtain its funds to pay compensation to investors?
The Investor Compensation Scheme is not an insurance company. It is not funded by the Government or by the taxpayer. The Scheme is funded by contributions from most intermediaries which are licensed by law to provide investment services. These contributions take the form of a fixed amount which is paid annually and a variable provision which accumulates each year and is payable on call, in case of need.

10. What if I have more than one claim?
An investor can only submit one claim for all his investments taken in aggregate against a failed licensed firm.

11. What if I have a joint account or a trust, or my holdings are held under nominee?
Joint investment accounts are divided equally between account holders where there is no indication of the share of each holder in the account. Each will be covered up to the limits prescribed in the Regulations, subject to eligibility.  In respect of investments held by a person acting as trustee or nominee for one or more beneficial owners, the investment making up the claim shall be deemed to belong to such beneficial owners equally unless there exists specific information which may otherwise determine the beneficial interests of such persons.

Last Updated: 09 Feb, 2017