CySEC Delists OptionRally and Four Brokers from Investor Compensation Fund
The Cyprus Securities and Exchange Commission (CySEC) today published a new list of financial services providers that were disbarred from its lifeboat scheme.
However, the clients of these brokers 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.
The most notable brand of those expelled from the CySEC’s compensation scheme is the now-defunct binary options broker OptionRally. Following the firm’s decision to renounce their authorisation in Cyprus, OptionRally said goodbye to its CySEC approval almost a year ago.
In 2017, OptionRally was hit by a series of fines and license suspensions, but the CySEC ultimately cancelled its previous penalties after the firm satisfied its regulatory obligations.
OptionRally, founded in 2010, had acquired its CySEC license back in 2013 when the brand began to expand out of its origins in Israel.
In addition to OptionRally, the CySEC has written off Deloitte Investment Services Ltd, Rodeler Ltd, Stocks Forex AF Ltd, and Globia Wealth Ltd.
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 company, 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.
Earlier 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.
