Two investor protection schemes launched

Two schemes aimed at protecting investors were launched yesterday by Finance Minister John Dalli.

The Investor Compensation Scheme provides protection in cases related to licensed investment services providers that go out of business and cannot return money invested by them on behalf of their clients.

On the other hand, the Deposit Guarantee Scheme provides a mechanism where depositors may be entitled to compensation in the event of a bank failure.

Addressing a press conference at the Malta Financial Services Authority, Mr Dalli said the two schemes were introduced as an additional layer of security within an already sound framework.

He said the schemes were essentially a last resort remedy designed to ensure minimal impact in case of a mishap.

Compensation is only payable where a financial intermediary or bank is unable, due to financial circumstances, to return money or investments and has no foreseeable prospect of being able to do so.

The scheme does not apply in certain conditions or circumstances, such as a drop in the value of investments if prices of stock markets go down.

All financial intermediaries and banks are required to become members of these schemes.

Before any scheme can begin the process of paying compensation to depositors or investors, it must be advised by the Malta Financial Services Authority that:

¤ A Maltese court has ordered the winding-up or liquidation of a bank or an intermediary, or;

¤ The MFSA has made a decision that an intermediary is unable to meet its financial obligations to its clients.

These schemes will not return all the money to the investor or depositor.

Mr Dalli said the schemes were based on EU directives which provided ample evidence of the EU's protective measures for investors.

The two schemes are financed by the banks and financial intermediaries respectively. This means that the consumer will not be asked to contribute to these schemes.

The management committee overseeing the schemes is chaired by Frank Xerri de Caro.