CySEC delists SpotOption, FXVC and Sharelink from compensation fund

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 Finteractive Ltd (trading as FXVC), MPS Marketplace Securities (formerly known as SpotOption) and Sharelink Securities & Financial Services Ltd.

Finteractive renounced its authorization, the Cyprus Investment Firm (CIF) License, back in July. At the time, CySEC fined this broker €100,000 due to shortcomings in the company’s regulatory obligations.

Earlier this year, the Cypriot watchdog had taken away the licenses of MPS Marketplace Securities and Sharelink Securities & Financial Services Ltd. According to two regulatory announcements, both firms had their CIF authorizations withdrawn on its own request and the surrender of their respective license was entirely voluntary, not the result of any regulatory action taken by CySEC.

Clients of the three brands 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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