The European Commission has launched a call for evidence on the review of the application of the Investor Compensation Schemes Directive, Directive 1997/9/EC, which aims to protect investors against the risk of losses in the event of an investment firm's inability to repay money or return assets held on behalf of their clients. Interested parties can reply to this call until April 8th 2009.

The Commission wishes to gather information about the application of the Investor Compensation Schemes Directive, and invites all interested stakeholders, in particular businesses, investors and consumers, as well as public authorities to participate. This call for evidence is also in line with parallel initiatives concerning the Deposit Guarantee Schemes Directive and insurance guarantee schemes.

Issues to be addressed by Investor Compensation Schemes Directive call for evidence

• The scope of the Directive in terms of services covered, also in the light of the implementation of Directive 2004/39/EC on markets in financial instruments (MiFID).
• The amount of compensation.
• The funding of the compensation schemes which represents a crucial part of the functioning of the mechanism.
• Some technical aspects which may hamper the efficient and timely functioning of the schemes (notably, any existing restrictions on the carrying of unpaid reimbursement debts over a certain period of time and the need to set effective reasonable deadline for reimbursement).

The call for evidence also considers issues related to the treatment of money market funds.

The Commission aims to “gather information on the practical application of the Investor Compensation Schemes Directive since it entered into force ten years ago, especially in light of the current financial crisis”, said Internal Market and Services Commissioner Charlie McCreevy, adding that this “will help us to assess whether and how the Directive should be modified in order to better protect investors. I encourage all interested parties to give us their views."

All interested parties are invited to submit their opinions by email to Unit G3 – Securities Markets in the Directorate General Internal Market and Services, until April 8th 2009. They can also be sent by postal mail to the following address: SPA 2 03/079, B-1049 Brussels, Belgium.

The Investor Compensation Schemes Directive

The main purpose of the Directive is to protect investors' money and financial instruments in the case where insolvency or default events result in the inability of an investment firm to return them to (essentially retail) investors. The schemes therefore protect investors' assets against the risk of fraudulent misappropriation. They may also provide protection where the loss of investor assets in the event of a firm default derived from errors, negligence or problems in the firms' systems and controls.

This Directive had been modelled on the Deposit Guarantee Schemes Directive which set minimum rules for compensation of customers of credit institutions that fail. The Directive only contains the minimum harmonisation necessary to achieve the objectives being pursued.