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Investor compensation schemes

EU rules to compensate investors when investment firms fail to return their assets.

EU rules to protect investors

The directive on investor compensation schemes, adopted in 1997, protects investors by providing compensation if an investment firm fails to return the investor's assets. Claims under the directive typically arise if there is fraud or other administrative malpractice or when an investment firm is unable to fulfil its obligations as a result of operational errors. The directive does not cover investment risk, such as when an investor has bought stocks which then fall in value.

The directive requires EU countries to set up one or more investor compensation schemes, ensuring a minimum level of compensation per investor of €20,000. All firms supplying investment services must belong to such a scheme.

Revised proposal on investor compensation schemes

In 2010, the Commission proposed to update the rules in response to complaints about how the directive was being applied. In some EU countries, compensation schemes did not have sufficient funds to pay out claims or there were lengthy delays in payouts.

Under the new rules proposed by the Commission, investors would be compensated 9 months after the investment firm's failure at the latest. The level of compensation would increase from €20,000 to €50,000.

As the proposal was not endorsed at EU level, the Commission decided to withdraw it in March 2015.


Executive Report: Evaluation of the investment compensation scheme directive