The Investor Compensation Scheme Act 2002 was passed by the House of Assembly on 14 June 2002 to give effect to EU Directive 97/9/EC which requires Member States to establish investor compensation schemes.  The Act came into operation on the 24th July 2003.

Participation

It is a condition of a firm's authorisation that the firm is a member of the Scheme. Branches of Gibraltar firms operating in other EEA States can 'top-up' into that State's scheme. Where the firm ceases to provide services and surrenders its authorisation to conduct such business, it will still be liable to pay any contributions should another firm fail between the date of the surrender and the expiry of six months.

Branches of non-EEA State firms are also required to participate in the Scheme where their home country does not offer equivalent protection.

List of current scheme participants

The Board

The Act establishes The Gibraltar Investor Compensation Board. This Board is charged with administering the Scheme and is independent of the Financial Services Commission or Government of Gibraltar. The Board may employ persons to provide services for the day-to-day administration of the Scheme, or for administering claims for compensation.

Appointments to the Board are made by the Minister responsible for Finance and consists of the Financial Services Commission (FSC) Chief Executive Officer, the FSC Head of Banking and Investments and individuals nominated from the following industry associations:

The Board meets bi-annually and the table below lists the current members *(and alternates) in attendance at meetings held in 2013/2014:


Recent attendance at GICS Meetings by Members
Member Meeting Number
Name Position 38
(Sep 2014)
37
(Jun 2014)
36*
(Feb 2014)
35
(Dec 2013)
34
(Oct 2013)
33
(May 2013)
32
(Feb 2013)
Samantha Barrass Chairman       - - - -
Marcus Killick Ex-Chairman              
Heidi Bocarisa            
Raymond Joubaud GFIA              
Lindsey Brown GFIA       - - - -
Moe Cohen* GFIA              
James Lasry* GFIA              
Emma Perez GBA              
Mark Dellipiani GBA       - - - -
Christian Garcia* GBA              
Derek Sene* GBA              
Colin Vaughan GSA              
Desiree McHard* GSA              
Melo Triay GCBG              
Kenneth Navas* GCBG              

* Alternate

+ No longer a member


The quorum of the Board is three members, one of whom must be the Chairman.

The Board is a body corporate and may be sued in its name. However, members of the Board have immunity from prosecution or suit for all actions or omissions while carrying out the functions of the Board unless any action or omission is shown to have been in bad faith.

The Board is required to have its accounts audited, and these must be published within three months of the end of the audit having taken place.

Establishment of funds

The Board has to establish :

The Board may levy administrative fees to cover administrative costs from Scheme participants. It may also hold its monies in a range of assets. The Board also has the power to borrow money and take out insurance policies.

Failures

A firm is in default for the purposes of the Scheme as soon as the Chief Executive Officer of the Financial Services Commission (FSC) makes a declaration to that effect. This must take place within 21 days of any of the following events occurring :

Compensation

The Board must pay compensation to an investor (who qualifies) in respect of an eligible investment if a firm is in default and the Board is satisfied that the firm in default holds or controls that eligible investment. Verified claims must be paid within three months of the establishment of the claim. The Board may seek, in exceptional circumstances, an extension of this period by a further period of up to three months.

The Board must be in a position to provide claimants with a clear form in which they can submit their application for claims. This form must be in English in Gibraltar, and in the official language of the EEA State where a branch of a Gibraltar investment firm is situated. The form must state the right of the Board to subrogation (i.e. to take over ownership of assets in respect of which compensation has been paid). The form must also require claimants to give :

Amount of Compensation

The total amount of compensation each successful claimant is entitled to receive is limited to the lesser of :

The following will be deducted from the amounts payable by the Scheme :

Investments held in joint names will be divided according to the investors’ shares or equally if there is no indication available of the share of each investor. Partnerships or similar associations will be treated as one claimant. Investments held by trustees, or their equivalent, will be treated as one claimant unless each of the beneficiaries can be separately identified, and had a separate right under the trust before the date of the declaration by the Commissioner.

Investments will be converted into Sterling at the official rate on the date nearest to the declaration by the Commissioner.

Claimants who are dissatisfied with decisions of the Board in respect of compensation may appeal to the Supreme Court.

Fees and levies

Administrative fees

Each year, the Board may require each participant to pay an amount determined by the Board. These fees will seek to cover the expected administrative expenses in that year together with any shortfall in previous financial years of receipts over administrative expenses. These fees become due at the beginning of each financial year of the Board, or, in the case of a new participant, the date on which it becomes a participant.

The Board will also be required to take a decision on the amount and apportionment of start-up costs of the Scheme.

It is also possible for the Board not to charge administrative fees in any financial year if it has sufficient funds already.

Levies

On the Chief Executive Officer of the FSC declaring a default, the Board will levy, from the remaining participants, one or more levies to meet the costs of the compensation payable under the Scheme.

The will be calculated as follows:

Similarly, once all payments have been effected by the Board, any surplus funds will be repaid to participants in the same proportion as the levy was raised.
Written notice must be given to each participant when raising the levy. This must state:

If a firm fails between the notice of the levy and payment being made, the liability of that firm will be cancelled.

Co-operation

Participants must make available to the Board all information which it requires in order to carry out its functions. This duty also extends to the successor of a participant (liquidator, receiver, etc). The duty in relation to the liquidator or receiver extends to information which will assist the Board in exercising its rights of subrogation.

The Board will be considered a creditor of a firm which is in default. It can also nominate a member (or alternate) to sit upon a creditor's committee or committee of inspection and is also entitled to receive any notice addressed to creditors as well as being able to attend and vote at any creditors' meeting.

The liquidator or receiver of a defaulting firm must pay to the Board any amount realised in respect of an eligible investment up to the amount of compensation paid or payable by the Board to the claimant.

Subrogation

Before paying any compensation, the Board must receive confirmation from the claimant that :

Any amount received by the Board shall be paid into the fund established in respect of the default in question.

Withdrawals from the scheme

If a firm does not comply with the requirements of the Ordinance, the Board will inform the Chief Executive Officer of the FSC who may decide to revoke the authorisation granted to it under the Financial Services (Markets in Financial Instruments) Act. Investors with eligible investments at the time of revocation of that firm's authorisation will still be covered by the Scheme and the firm will still need to pay the annual fees as well as any levies that are imposed.

Information for investors

All participants in the Scheme must make available to their investors information about the scheme(s) to which they belong as well as a summary of the provisions of the scheme(s) including the amount and scope of their coverage. actual or intending investors may ask firms for details about the conditions for compensation and the procedures for claiming it and the firm must provide this. All this information must be provided in English when given in Gibraltar or in the official language of the member state where a branch is established.

Advertisements for investments do not have to make reference to the level of coverage but must make factual references to the existence of the scheme and participation of the firm in the scheme and any other schemes to which the participant belongs.