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Investor Compensation Fund

The cover the Investor Compensation Fund provides to clients of Luna Wealth Asset Management and how compensation is paid.

Introduction

As per the requirements of Directive 97/9/EC of the European Parliament and of the Council on investor compensation schemes, all Member States are required to establish investor compensation schemes within their territory which shall provide cover for investors. The Investor Compensation Fund (the “ICF”) has been established pursuant to the provisions of Law 144(I)/2007, which has been replace by Law 87(I)/2017 which provides for the provision of investment services, the exercise of investment activities, the operation of regulated markets and other related matters.

The powers and functions of the ICF are regulated by the provisions of Directive DI87-07 of Cyprus Securities and Exchange Commission (the “CySEC”) for the operation of the ICF. The object of the ICF is to secure the claims of the “Covered Clients” (as defined below) against any CIF which is a member of the ICF, if the conditions for payment have been fulfilled. More details about the conditions which may result in a compensation can be found below.

Luna Wealth Asset Management Ltd (hereinafter the “Company”) is a member of the Investor Compensation Fund.

Scope

The ICF applies to the Covered Clients as defined by the Law for claims arising out of the Covered Services as defined by the Law. The purpose is to provide adequate information to the Clients of the Company regarding the cover provided by THE ICF, the Covered Clients, the maximum amount of the compensation payable to the Clients for the total of their claims, as well as the preconditions and formalities for the payment of the compensation.

This statement is based on the legal framework created by:

  • Directive 97/9EC of the European Parliament and of the Council of 3 March 1997 on investor compensation schemes (the “EU Directive”).
  • Investment Law 87(I)/2017 which provides for the provision of investment services, the exercise of investment activities, the operation of the regulated markets and other related matters (the “Investment Law”).
  • Directive DI87-07 for the operation of the ICF which replaced Directive DI144-2007-15 for the continuance of operation and the operation of the CIF Investor Compensation Fund and Directive DI144-2007-09 on the General Meeting of the Member of the ICF for clients of IFs (the “Directive”).

Application of the ICF

The objective of the ICF is to secure the claims of the Covered Clients against the Company through payment of compensation, proved that at least one of the following preconditions is fulfilled:

  • CySEC has determined by Resolution that the Company, as a member of the ICF, is unable, to meet such of its duties as arise from its investor/clients’ claims in connection with the provision of investment services for which the Company is licensed or the ancillary service of Safekeeping and administration of financial instruments for the account of Clients provided that such inability is directly related to its financial circumstances on respect of which there is no foreseeable realistic prospect of improvement in the near future, or;
  • A judicial authority has, on reasonable grounds directly related to the financial circumstances of the Company, issued a ruling which has effect of suspending the investors ability to lodge claims against the Company;

The ICF shall pay no compensation in respect of claims arising out of transactions involving individuals convicted of a criminal offence for the said transactions, pursuant to the provisions of the Prevention and Suppression of Money Laundering and Terrorist Financing Law of 2007 (the “AML Law”). The ICF shall compensate all investors of the Company in respect of claims arising out of the Covered Services.

Covered Clients

Covered Clients are all the Clients of the Company that are NOT included in the following categories of investors:

  • Institutional and professional investors such as:
    • Investment firms,
    • Legal entities associated with the Company and in general, belonging to the same group of companies,
    • Banks,
    • Cooperate credit institutions,
    • Insurance companies,
    • Collective investment organisations in transferable securities and their management bodies,
    • Social insurance insitutitons and funds,
    • Investors charactertised by the Company as professionals.
  • States and supranational organisations.
  • Central, federal, confederate, regional and local administrative authorities.
  • Enterprises associated with the Company.
  • Managerial and admnistrative staff of the Company.
  • Shareholders of the Company, whose participation directly or indirectly in the capital of the Company amounts to at least 5% of its share capital, or its partners, who are personally liable for the obligations of the Company, as well as persons responsible for the carrying out of the financial audit of the Company, such as its qualified auditors.
  • Investors having enterprises connected with the Company and in general, of the group of companies to which the company belongs, positions or duties corresponding to the ones listed above.
  • Second degree relatives and spouses of the persons listed in paragraphs above as well as third parties acting for the account of these persons.
  • Investors whose claim arises out of transactions involving individuals who have been convicted of a criminal offence for these transactions, pursuant to the Concealment, Investigation and Confiscation of proceeds from Criminal Activities Act 1996 as amended.
  • Investors - clients of the Company responsible for facts pertaining to the Company, which have caused its financial difficulties or have contributed to the worsening of its financial situation or which hove profited from these facts.
  • Investors in the form a company, which due to its size, is not allowed to draw a summary batance sheet with the CompanIes Law, or a corresponding law of a member state of the European Union.

Covered Services

Covered services are the investment and ancillary services that the Company has been authorised to provide by the CySEC under License No 379/19.

Covered Claims

The ICF covers claims arising due to the Company’s failure to:

  • Repay the funds owed to the covered clients or belonging to them and held on their behalf in connection with investment operations in accordance with the applicable legal and contractual conditions, or
  • Return to covered clients any financial instruments belonging to them and held, managed or administered on their behalf in connection with investment operation in accordance with the applicable legal and contractual conditions.

The amount of the claim of a covered client shall be calculated based on legal and contractual conditions, in particular those to offsetting and counterclaims, that are applicable to the assessment on the date of the initiation of the compensation payment procedure as detailed below, of the amount of the funds or value determined with reference to the market value, where possible, of the financial instruments belonging to the covered client and which such funds or instruments, the Company fails to repay or return, respectively.

Compensation Procedure

The payment of compensation by the ICF shall entail the following conditions:

  • The initiation of the compensation payment procedure.
  • The existence of a valid claim by a covered client against the Company, which derives from an investment operation.
  • The submission of an application form.
  • That the claims do not arise from transactions for which there has been a criminal conviction for money laundering a defined in the AML Law.
  • There are no pending criminal proceedings against the covered client for money laundering as defined in the AML Law.
  • The right of a covered client has not been extinguished under the Limitation of Offenses Act.

The calculation of the compensation payable shall arise from the sum of the total established claims of the covered client against the Company, arising from all covered services provided by the Company and regardless of the number of accounts of which it is the beneficiary, the currency and place where such services are provided within the European Union.

The ICF shall provide coverage for the claims referred above, which applies for the total established claims of the covered client against the Company, arising from all covered services provided by the Company and regardless of the number of accounts of which the Client is a beneficiary, and shall be defined as the lower of 90% of the cumulative covered claims of the covered client and €20,000.

In case of joint investment business:

  • In the calculation of the coverage provided for, as described above, the share attributable to each covered client shall be taken into account.
  • The claims shall be allocated equally amongst covered clients, unless there exist special provisions and without prejudice to paragraph 3 below, each covered client is provided with separate coverage pursuant to the provision stated above.
  • Claims relating to joint investment businesses to which two or more people are entitled as members of a business partnership, association or grouping of a similar nature, which has no legal personality, shall, for the purpose of calculating the coverage provided for, as described above, be aggregated and treated as if arising from an investment made by a single investor.

Where a covered client is not the ultimate beneficiary of the funds or financial instruments held by the Company:

  • Compensation shall be paid to the ultimate beneficiary if his identity is or may be established prior to the date of the determination or ruling referred above.
  • If the ultimate beneficiaries are more than one, in the calculation of the coverage provided form the share attributable to each one of them according to the arrangements regulating the management of the funds or financial instruments shall be taken into account. This paragraph does not apply to undertakings for collective investments.

Compensation shall be paid in Euro, and where the funds and/or financial instruments are expressed in a currency other than the Euro, the exchange reference rate of the said currency against the Euro fixed by the European Central Bank, at the end of the day on which the compensation payment procedure was activate, shall be used.

The decision on submitted applications is made by the Administrative Committee which shall examine the applications before it and decide whether the conditions as set above are fulfilled or not. The Administrative Committee shall reject an application where the claimant has used false or misleading means in order to secure the payment of the compensation. When examining the applications, the Administrative Committee shall take into account the recommendations of the people appointed for the evaluation of the applications as per the provisions set above.

The ICF may require at any time from a covered client to return the compensation paid to it, if it subsequently establishes that there has been a reason for the rejection of the application in accordance with the provisions of the Directive.

Upon completion of the procedure before the Administrative Committee, the ICF shall:

  • Issue a decision listing the covered clients of the Company, determining the amount of money each one of them is entitled to receive, and communicate it to CySEC and the Company within five (5) working days from its issue.
  • The said decision shall also list those clients to whom no compensation shall be paid and the reasons for this.
  • Communicate to each affected clients its decision the soonest possible from its issue.

The claimant to whom the ICF communicates its decision, may, in case of disagreement, submit an objection in writing to CySEC, within one month from the date on which the decision was notified, justifying the objection sufficiently. The objection shall be submitted at info@cysec.gov.cy and entitled “Objection to the Decision of the ICF”. CySEC in the context of examining an objection may:

  • request from the fund and/or the Company and/or the claimant to submit information and particulars,
  • conduct any investigation.

The ICF shall pay each covered client the compensation he/she is entitled to, within three (3) months from the date that the decision was communicated to the covered client. The payment of the compensation by the ICF shall be deposited to a bank account of the covered client, as designated by the said client in writing via the claim application from as described above. In extraordinary circumstances and justified circumstances, the ICF may request from CySEC an extension of the deadline provided above. Such extension may not exceed three (3) months.

The payment of any compensation by the ICF entails ipso jure subrogation of the ICF to the rights of the compensated covered client against the Company during the liquidation procedure of the Company for an amount equal to the compensation payable thereto.