DEPOSIT AND FINANCIAL INSTRUMENT PROTECTION FUND
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Protection for financial instruments

Protection covering the non-return of deposited securities
Direct property right
Strict rules on safekeeping of securities
Maximum protection
No protection for capital losses
Collective investment funds held on a securities account
Intervention rules
1. Protection covering the non-return of deposited securities

This second type of protection applies to financial instruments that a client has entrusted to his bank or stockbroking firm. In the event that this client is no longer in a position to recover his securities because the depository institution has become insolvent, he can turn to the protection scheme to make good the loss he might have incurred.

2. Direct property right

Attention should nevertheless be drawn to the wide legal protection enjoyed by a client for the instruments that he has entrusted to his financial institution. Indeed, the client always remains the legitimate owner of his securities and has the right to a direct repayment claim on them. That means that the securities must be returned to him by the trustee and can therefore never be included in the collective assets in the event of bankruptcy.

3. Strict rules on safekeeping of securities

A financial establishment's business in financial instruments is, moreover, subject to very strict rules. The legislation that entered into force as of November 2007 with the implementation of the MiFID Directive also contains measures leading to better protection for investors, not only because of improvements to the rules of conduct and provisions governing execution of orders and internal organisation of financial institutions but also thanks to a tightening up of the requirements concerning the safekeeping of financial instruments for the account of clients.

Another contribution to more advanced optimisation in the field of safekeeping of securities has been made by the legislation relating to the abolition of bearer shares which stipulates that there will no longer be any bearer securitues in circulation as of the end of 2013.

Intervention by the Protection Fund will only have to be envisaged if, after all available securities have been returned (securities belonging to the customers, as well as those belonging to the institution itself should some securities be missing), clients have not been able to recover some of their assets. This kind of scenario should only arise in the event of administrative errors or other irregularities.

4. Maximum protection

Because of these solid guarantees, the risk of a client's claim remaining open against the defaulting institution, after all available securities have been returned, is very small. For these reasons, the maximum amount of the supplementary cover provided by the investor protection scheme remains fixed at € 20,000 per person and per institution. If, on the other hand, the client in question had not yet been fully compensated, he would still retain a claim on the financial institution for which he can lay claim to a liquidation or bankruptcy dividend.

5. No protection for capital losses

Securities or financial instruments placed in deposit will be returned in the form of a transfer to a securities account opened with another institution, regardless of the value of these securities at the time the depository institution defaults. The protection scheme provides no cover against any possible capital loss on these securities.

6. Collective investment funds held on a securities account

Mutual funds (Sicav) or unit trusts are distinct legal entities and invest their resources in assets that are their own property and which can therefore not be included in the collective assets in the event of insolvency of the depository institution. These assets thus go to the clients.

7. Intervention rules

The precise conditions that need to be met in order to claim compensation under the protection scheme are mentioned in the Rules of Intervention.

These rules determine the beneficiaries who may qualify for a reimbursement, the type of assets eligible for compensation, the method of calcuating the compensation and the procedures to be respected.

 

NB: No rights can be derived from the above information