Cyprus compensation fund (ICF) to protect customers of Sonafx and BelightFX

abdelaziz Fathi

The Cyprus Securities and Exchange Commission (CySEC) today published a new list of financial services providers that were disbarred from its lifeboat scheme.

The most notable brands of those expelled from the CySEC’s compensation scheme are the retail FX brokers Sonafx.com and Belight Capital Group Limited.

Sonafx renounced its authorization, the Cyprus Investment Firm (CIF) License, back in November 2021. At the time, CySEC made it clear that the Sonaf’s surrender of license is entirely voluntary based on the company’s decision and does not arise as a result of any regulatory action.

Earlier in September, the Cypriot watchdog had wholly withdrawn the CIF license of Belight Capital. This was not a surprise, as Belight Capital, which operates the retail FX brand BelightFX, was already suspended back in April 2020. When accessing the domain officially approved by CySEC, www.belightcapitaltroup.com, there was apparently no trading on this website even then.

BelightFX has had lapses in its organizational requirements which, among other things, saw the company didn’t provide investment services during the six months preceding the suspension of its license.

Clients of Sonafx.com and BelightFX are still entitled to benefit from the Investor Compensation Fund (ICF), which serves to protect the claims of covered clients and provide them with compensation in case a member could not meet its financial obligations.

CySEC further explains to the public that “It should be noted that losing membership of the fund does not mean a loss covered clients’ rights to compensation for investing that took place until the loss of membership. Any outstanding debts owed by members to the fund, continue to exist until they are paid, irrespective of their deletion.”

What’s Next?

The regulator often kickstarts the compensation payment procedure after it revokes the authorization of a company that is not expected to pay back its obligations in the near future.

The next step, if any, will see the ICF inviting covered clients to make their claims against the companies in questions, designating the procedure for filing compensation applications and the deadline for their submission. Next, the fund publishes the details in at least two local newspapers, including the address at which investors may be informed about the progress of their applications.

The amount of the compensation payable to each client is calculated in accordance with the contractual terms governing his relationship with the faltering broker, but in general, the maximum amount does not exceed €20.000.

In 2019, CySEC changed maximum compensation for valid claims to be either 90 percent of the cumulative covered claims or €20.000, whichever is lower. Therefore coverage = Min (90 percent Χ claimed amount, €20.000). This means that an investor who holds €50.000 with a CIF, which runs into trouble and is unable to pay, will get €20.000 from the ICF. However, if the claim is for €10.000, the coverage will be only 90 percent or €9.000, not 100 percent, as previously calculated.

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