CySEC ICF writes off F1Markets, NFX Capital and Tradocenter

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 Investor Compensation Fund (ICF).

The most notable brands of those expelled from the CySEC’s compensation scheme are the retail FX brokers F1Markets Ltd, Inveza Capital Ltd, and FF Simple and Smart Trades Investment Services Ltd (operating under the trade names Tradocenter and ToroInvest).

F1Markets (trading as Investous, StrattonMarkets and Europrime) renounced its authorization, the Cyprus Investment Firm (CIF) License, back in February. CySEC fined this broker in August €150,000 due to shortcomings in the company’s regulatory obligations. In particular, F1Markets was probed by Cysec for lack of compliance with regulatory requirements that govern the assessment of suitability and appropriateness of clients, as well as its obligation to execute orders on the most favourable terms to their customers.

In the same month, the Cypriot watchdog had taken away the license of Inveza Capital Ltd (ex NFX Capital CY Ltd) as the company materially contravened its licensing conditions.

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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