Investor Compensation Act, 1998

PART III

Payment of Compensation to Investors

Interpretation for Part III .

30.—(1) In this Part—

“compensatable loss” means 90 per cent. of the amount of an investor's net loss or 20,000 ECUs whichever is the lesser;

“net loss”, in relation to every client of an investment firm, means the amount of the liability of the investment firm in respect of—

(a) money owed to or belonging to the client and held on behalf of the client by the investment firm in connection with the provision of investment business services by the investment firm, and

(b) investment instruments, the value of the investment instruments being determined, where possible, by reference to their market value, belonging to the client and held, administered or managed on behalf of the client by the investment firm in connection with the provision of investment business services by the investment firm,

on the day of a determination made under section 31 (3) or a ruling, as appropriate, which the investment firm is unable to discharge in accordance with the legal and contractual conditions applicable but shall not include—

(i) any amount to which subsection (2) relates,

(ii) any monies or investment instruments held or maintained by an investment firm on behalf of an excluded investor,

(iii) money or investment instruments arising out of transactions in respect of which an offence has been committed under Part IV or section 57 or 58 of the Criminal Justice Act, 1994 , or in respect of which there has been a criminal conviction for money laundering as defined in Article 1 of Council Directive No. 91/308/EEC of 10 June 1991(1) on prevention of the use of the financial system for the purpose of money laundering.

(2) In calculating the amount of a client's net loss—

(a) there shall be deducted from the total liability of the investment firm to the client of the investment firm the amount of any liability of any person to that investment firm in respect of which a right of set-off against that net loss existed immediately before the determination by the supervisory authority under section 31 (3) or ruling or in respect of which such a right would have existed had—

(i) the money or investment instruments been repayable on demand, and

(ii) such liability fallen due,

immediately before such determination or ruling;

(b) no account shall be taken of any debt of the investment firm unless it has been proved;

(c) no account shall be taken of—

(i) money owed to or belonging to a client and held on behalf of the client by an investment firm in connection with the provision of investment services by the investment firm to the client and

(ii) investment instruments belonging to a client and held, administered or managed on behalf of the client by the investment firm in connection with the provision of investment services to the client,

where the money or investment instruments were entrusted by the client to the investment firm at any time when the investment firm was not an authorised investment firm, unless the supervisory authority is satisfied that, at the time the money or investment instruments were so entrusted, the client did not know and could not reasonably be expected to have known that the investment firm was not an authorised investment firm;

(d) account shall be taken, in the case of an insurance intermediary, of the amount of an insurance policy premium paid by the client to the insurance intermediary but not remitted to an insurance undertaking or, where a client of an insurance intermediary has suffered financial loss arising from the failure of the insurance intermediary to place on behalf of the client insurance of a class specified in Annex 1 to the European Communities (Life Assurance) Framework Regulations, 1994 or Annex 1 to the European Communities (Non-Life Insurance) Framework Regulations, 1994, the amount of that financial loss.

(3) Without prejudice to subsection (2),

(a) “net loss” includes money or investment instruments entrusted by a client to an investment firm, being an investment firm for the purposes of the Investor Compensation Directive, before or after the commencement of this Act, where such money or investment instruments were entrusted by the client in connection with the provision of investment business services which are investment business for the purposes of the Investor Compensation Directive;

(b) “net loss” includes, in the case of an investment firm which is not an investment firm for the purposes of the Investor Compensation Directive, money or investment instruments entrusted by a client to the investment firm after the commencement of this Act.

(4) Proof of debt for the purposes of subsection (2)(b) may be furnished by way of detailed statement of account, affidavit of debt or any prescribed means.

(1)O.J. No. L166, 28.06.1991.