Wednesday February 11 2009

News Source: Fund Regulation

Focus: General - Fund Regulation

Type: General

Country: European Union




In the wake of the financial crisis, the European Commission has launched a call for evidence on a review of the application of the Investor Compensation Schemes Directive (ICSD), which aims to protect investors against the risk of losses in the event of an investment firm `s inability to repay money or return assets held on behalf of their clients. This includes consideration of the UCITS & Madoff exposure issues.

The call for evidence consisting of 11 key questions; aims to gather information from Member States, market participants and other stakeholders, in particular investors, about the application of the ICSD across Member States and about the need to modify it in order to take into account the changes of a regulatory or economic nature that have materialised in the EU financial markets.

Issues that are up for comment include whether investors should be able to claim compensation in the case of default of the third party where their assets had been deposited and; whether a UCITS or a UCITS unit holder should be able to claim compensation for loss of assets under the ISCD in those cases where the UCITS depositary or the institution which has been mandated to safe keep the assets, fail to perform its duty?

The call for evidence also includes a separate section for money market funds asking whether special attention should be given to money market funds given that currently no compensation scheme exists with respect to money market funds shareholders at EU level.

The question has arisen whether some form of guarantee or investor compensation scheme should be extended to cover investments in these schemes in order to avoid competitive distortion between different types of savings or investment products. This question needs to be considered from the purpose of the guarantee and the type of risk that it is designed to protect against.

Click on the above link to download the document and for instructions on how to submit your comment.