Front page : Protection of Investors : Compensation for investments

Compensation for investments

Date of compensation

Investments made through an investment institution registered in Estonia or the Estonian branch of a foreign investment institution shall be guaranteed and compensated for the investors out of the Investor Protection Sectoral Fund in accordance with the provisions of this the Guarantee Fund Act.

In the case of the investments of credit institutions providing investment services, the obligation of the Fund to compensate for the investments under the conditions and pursuant to the procedure provided for in the Guarantee Fund Act arises on the date on which deposits become unavailable and, in the case of the investments of other investment institutions, on one of the following dates, whichever occurs first (hereinafter the compensation date):

the date on which a bankruptcy order of an investment institution is declared;
the date on which the activity licence of an investment firm is revoked or the date on which the authorisation granted to a foreign investment institution to found a branch in Estonia is revoked;
the date on which the activity licence of a management company is revoked;

In addition, the Supervision Authority may, by a resolution thereof, deem the compensation date to have arrived if an investment institution fails to return the securities or money belonging to investors to such investors or if circumstances become evident which indicate the insolvency of the investment institution.

Level of compensation for investments

Investments shall be guaranteed and compensated for pursuant to the provisions of the Guarantee Fund Act to the extent of 100 per cent of their value as at the compensation date but not more than in the amount of 20 000 euro per investor in any one investment institution.

For the purposes of the Guarantee Fund Act, the value of an investment is the value of the money and securities, determined pursuant to the methods established by the minister responsible for the area mainly on the basis of the market value of the money and securities.

Giving notification to investors

Within three working days after the compensation date, the Fund shall publish a notice in at least one daily national newspaper setting out at least the following information:

the name of the investment institution or the branch of an investment institution the investments of which are subject to compensation;
the term and place for submission of claims and the format of the claims;
the term and procedure for payment of compensation;
a list of the documents required upon the payment of compensation

The Guarantee Fund and the The Financial Supervision Authority publish this information immediately on their web sites.

Procedure for granting compensation

Not later than within forty-five days after the date of compensation, a member of the management board, trustee in bankruptcy, moratorium administrator or liquidator of an investment institution is required to:

provide each investor with information regarding his or her investments;
provide the Fund with information regarding the investors and their investments which are subject to compensation.

Investors have the right to submit their positions regarding their investments and the value thereof to the trustee within five months after publication of the notice in one daily national newspaper.

The Fund shall determine the investments subject to compensation and the amount of compensation payable under the conditions and pursuant to the procedure provided for in the Guarantee Fund Act on the basis of the information submitted by the trustee.

The amount of compensation shall be determined on the basis of the value of the investment on the compensation date. The value of a foreign currency and securities nominated in a foreign currency shall be converted into euros on the basis of the exchange rate of the European Central Bank as at the compensation date.

The minister responsible for tha area may establish more detailed bases and the procedure for granting compensation.

Compensation for joint investments shall be granted to the investors in equal parts unless otherwise agreed upon between the investment institution and the investors. For the purposes of the Guarantee Fund Act, a joint investment is an investment which is jointly owned by two or more persons. For the purposes of compensation for a joint investment, each owner of the joint investment shall be deemed to be an investor.

Payment of compensation

Compensation shall be paid in money by a bank transfer to the account indicated by the investor. Compensation shall be paid through one or several Estonian credit institutions specified in a resolution of the supervisory board.

Investors shall pay for the transfer of compensation unless otherwise agreed upon between the Fund and the credit institution making the payments. If the fee payable by an investor for the transfer is higher than or equal to the amount of compensation, the compensation shall not be paid. The fee charged for the transfer of compensation shall not exceed the ordinary transfer fee charged by the credit institution.

Compensation for investments seized pursuant to the procedure prescribed by law shall be paid after the entry into force of the corresponding judgment or ruling by a court or any other competent authority.

Term of compensation

Compensation shall be paid to an investor not later than within one month after determination of the value of the investment subject to compensation, but not before the investor has submitted his/her position regarding their investment and the value thereof or the term for submission has expired (that is within 5 months).

Payment of compensation shall be completed within six months after publication of the notice in one daily national newspaper.

The Fund may extend the terms specified under extraordinary circumstances and with good reason. A term may be extended by up to three months at a time, but not for more than a total of twelve months.

If the Fund fails to pay compensation within the term specified or pays less compensation than prescribed, the investor has the right to file a claim against the Fund. The limitation period for filing a claim shall be five years.

Other sources for compensation

If the assets of a sectoral fund are not sufficient to preform the obligations of the sectoral fund, the Fund may, on the basis of a resolution of the supervisory board:

take loans from credit institutions or other persons;
perform the obligations of the sectoral fund out of another sectoral fund;
apply for a state loan or a state guarantee for a loan taken by the Fund.

Right of claim

Upon payment of compensation to investors and other entitled persons, the right of claim against a fund participant shall transfer from such persons to the Fund to the extent of the amount paid.

The claims of entitled persons against a fund participant which have not been compensated for by the Fund shall be satisfied pursuant to the Bankruptcy Act and other Acts.