I own securities: compensation process

Customers are strongly advised to keep their service provider informed of any changes in their contact information, such as name, postal address, email address and landline and mobile phone numbers.
 
Compensation 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

1. The process is initiated when the ACPR 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”.

2. 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 contacts the FGDR. This sets in motion the investor compensation scheme and results in the immediate suspension of all the institution’s activities. The institution closes.

3. This date marks the start of the compensation process and the three-month compensation period. 

4. It is also the date as of which the value of customers’ securities, the balance of their securities accounts and associated cash accounts, and the amount of their compensation are calculated.
    

Step 2: preparation of compensation, customer account statement 

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. 

In practice, the three-month period applies to most investors, including all those whose situation does not pose any specific problems and whose contact information is complete and accurate.  

If the situation presents specific problems, such as in case of an incident or fraud, the FGDR performs additional practical or legal verifications in conjunction with the failed service provider and, where relevant, with the customer.

Step 3: payment of compensation within three months

1. The FGDR prints a compensation letter for each customer and sends it so that compensation can be paid within three months, which may be extended once, of the unavailability date. 

2. All appropriate information is enclosed with the investor’s compensation. Each compensation letter explains the compensation process and how the compensation was calculated:

   • the securities and associated cash in the accounts and whether they are available or unavailable;

   • the accounts and amounts that fall within the scope of the investor compensation scheme and those excluded from it;

   • the amount of compensation paid;

   • the amounts not compensated (for example, the amount of assets that exceed the €70,000 ceilings of the guarantees);

3. The compensation payment is sent to the account holder or their legal representative. Payment is made by cheque (default payment method used) or by bank transfer when possible or necessary. 

4. In practice, the three-month period applies to most investors, including all those whose situation does not pose any specific problems and whose contact information is complete and accurate.  

5. An additional three-month period may be applied, if necessary.

 Step 4: special cases

1. After the extendable three-month period during which most customers are compensated, the FGDR handles complex situations, special cases and claims and informs customers of the completion of the compensation process.
2. 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 amounts deposited at the same credit institution (or €70,000 for an investment firm).

The calculation includes all investment transactions carried out by the customer on these accounts up to the unavailability date. The value of the unavailable securities for which compensation is paid is the market value 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 of the failed investment services provider for those amounts not compensated by the FGDR.