Victims’ Compensation Funds for Traders

If trading really makes money, it also makes money, unfortunately. And it is not necessarily a question of losing during transactions, since even in the event of a gain, the possibilities of withdrawals always depend on the broker’s solvency. And that is where the victims’ compensation funds come into play. The details..

The investor compensation fund

The Investor Compensation Fund (ICF) is a protection fund for traders. This is a backup fund in the event that the broker cannot pay his clients, particularly because of his financial situation.

Traders thus receive compensation from the fund in the event of a problem, provided, however, that the broker is part of this clearing fund. Indeed, the broker remains primarily responsible for traders’ claims, but if there is non-payment of debts, it is the compensation fund that comes into play. The latter is involved, among other things, in the transmission of orders and their enforcement, but also in the management and investment of assets.

Investor Compensation Fund

Who is protected?

The Investor Compensation Fund is governed by strict regulations. In particular, the protection offered is not accessible to everyone, but is dedicated only to non-professional clients.

In principle, a private trader can benefit from it, unless he is classified by the broker as a professional client. Investment firms, companies, brokers, organisations and companies linked to the ICF are not concerned by this compensation fund.

It should be noted that the compensation offered is calculated on the basis of the value of the securities on the market, from the date of the broker’s declaration of insolvency. However, the amount may not exceed €20,000.

Who are the members?

All brokers recognized and regulated by regulatory authorities are members of the Investor Compensation Fund. For operators, it is not only a matter of protecting themselves from penalties in the event of disputes, but also of offering a guarantee to their customers and thus gaining their trust.

Each broker pays an admission fee and ensures that the annual fee is paid to the ICF. The fund raised will then serve as a backup plan in the event of a member insolvency problem. Although the compensation offered remains capped, it must be acknowledged that brokers who are members of this type of fund remain the safest. Before registering with a broker, traders should therefore check the compensation guarantees offered and also ensure that they are well regulated in your country.