The following Financial Services guidance note provides comprehensive and up to date legal information covering:
The Investor Compensation Schemes Directive (EC) 97/9 (ICSD) is one of two existing EU guarantee scheme directives. The other, the Deposit Guarantee Schemes Directive (DGSD) is discussed in Practice Note Deposit Guarantee Schemes Directive. Both directives require Member States to establish, respectively, depositor and investor protection schemes, offering minimum levels and scope of protection to customers of DGSD and ICSD covered firms.
The ICSD requires Member States to set up one or more investor compensation schemes (ICSs) in its territory. Investment firms supplying investment services must belong to such a scheme. ICSs are intended to be a last resort safety net to protect investors against the risk of losses if an investment firm cannot repay money or return assets held on behalf of investors. They are not intended to cover investment risk: for example where an investor has bought stocks which subsequently fall in value.
The UK meets its obligations under the ICSD and the DGSD through the Financial Services Compensation Scheme (FSCS). For more information on the FSCS, see Practice Note The Financial Services Compensation Scheme.
Although the ICSD does not specify how Member States are to fund an ICS, the ICSD does note that the cost of financing ICS must be borne by investment firms
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