I own securities: compensation process

Customers are strongly advised to keep their service provider continuously informed of any changes in their contact information, such as name, postal address, email address and landline and mobile phone numbers.
Compensation i sent by the FGDR to an old postal address may be returned to it, and the FGDR may be unable to contact the customer again in order to pay the compensation.

Note: an investment services provider may be a bank authorised to provide this type of service or an investment firm. For the sake of simplicity, we will use the term “investments services provider” here. 

 Step 1: initiation of the compensation process

• The process is initiated when the ACPR, after obtaining the opinion of the AMF, determines that the securities and associated cash entrusted to the investment services provider are no longer available to customers and that the institution's financial situation prevents it from fulfilling its obligation to return them or pay compensation to customers. The date on which the ACPR makes this determination is the "unavailability date".
• This is the date on which the securities and associated cash have become unavailable for all practical purposes. Customers lose free access to their securities and associated cash. The ACPR then refers the matter to the FGDR. This referral sets in motion the Investor Compensation i Scheme and results in the institution's deregistration, entailing the immediate cessation of all its activities. The institution closes.
• This date marks the start of the compensation process and the the two months compensation period.

• It is also the date as of which the value of customers' securities, the balance of their securities accounts and associated cash accounts linked to them, and subsequently the amount of their compensation, are calculated.

   

Step 2: preparation of the compensation 

1. The failed institution sends the FGDR, as quickly as possible, all the information and documents needed to verify the customers’ situation and the amount, composition and availability of their funds in order to calculate the compensation.
2. The FGDR verifies the data sent, identifies the securities for which compensation is to be paid and calculates each customer’s compensation. The verifications, particularly of the securities accounts, are performed on an account-by-account, security-by-security basis, and in some cases may require additional time and resources, such as in the event of fraudulent failure, if the number of intermediaries makes data traceability more difficult, or if the securities are deposited with foreign intermediaries.
3. The FGDR then calculates each customer’s compensation. 
4. The text provides for a period of 2 months from the date on which the FGDR established each client's eligibility and the amount to be compensated.
5. In exceptional circumstances, this period may be extended with the agreement of the ACPR.

If the situation presents particular difficulties, for example in connection with an incident or fraud, the FGDR carries out additional practical or legal checks in liaison with the failing service provider, and where applicable with the client.

Step 3: payment of compensation

1. The FGDR prints a compensation letter for each customer and sends it, along with all necessary information, so that compensation can be paid within three months, which may be extended once, of the unavailability date. Each compensation letter explains both the compensation process and how the compensation was calculated:

• the nature and amount of the securities and associated cash included in the compensation calculation, and the nature and amount of those excluded from it;
• the amount of compensation paid;
• the securities and amounts not compensated (for example, the amount of assets that exceed the €70,000 ceiling of the guarantee);
• the remaining available securities and associated cash that the customer must claim directly from the administrator or liquidator i of their investment services provider;
• the procedure for requesting the transfer of the remaining available securities to a new authorized institution (investment services provider);
• the available means and deadlines for appeal, as well as the limitation period.

• The compensation payment is sent to the account holder or their legal representative. It is made by cheque with acknowledgment of receipt (the default payment method) or by bank transfer.

 Step 4: special cases

1. The general principle is that the two-month period is the one within which the majority of customers are compensated.

2. In addition, the FGDR handles complex situations, special cases, and any claims, and must compensate customers within less than 20 working days after the necessary processing has been finalized. Exchanges between the FGDR and customers continue as necessary.

To determine each customer's compensation amount, on the unavailability date the FGDR:

• checks whether the customer of the bank or investment firm is covered by the guarantee;
• lists all the unavailable securities held in all the customer’s securities accounts which are eligible for the guarantee;
• where appropriate, makes a distinction between the customer's business accounts and personal accounts (each account type entitles the holder to the double compensation ceiling);
• treats an undivided co-ownership or partnership as a specific recipient separate from its members;
• identifies each co-holder’s share of joint accounts;
• totals the value of the unavailable securities held in the customer's individual accounts and the customer’s share of their joint accounts;
• totals the value of the unavailable cash held in the customer's individual accounts and the customer’s share of their joint accounts;

• applies the €100,000 compensation ceiling for associated cash deposits, which are added to the customer's other deposits if the institution is a bank (up to €70,000 if it is an investment firm).

The calculation includes all investment transactions carried out by the customer on these accounts up to the unavailability date declared by the authorities. The value of the unavailable securities for which compensation is paid is the market value in euros on the unavailability date.

Appeal in case of disagreement on the investor’s compensation

• Customers have two months to file an informal appeal with the FGDR if they disagree with the compensation. 
• If the appeal is rejected, they have an additional two months to make an application to the Paris Administrative Court based on the rules governing administrative disputes.

Declarations to the liquidator

After compensation is paid, the FGDR replaces the customers as the institution’s creditor for the amounts it has paid; it is said to be subrogated to the customers' rights.

• Customers do not need to make a declaration for the portion of their deposits for which compensation was paid.

• The FGDR informs customers of the rules and procedures for filing claims with the assignee in bankruptcy or with the liquidator i of the failed investment services provider for those amounts not compensated by the FGDR.