CELEX: 51993PC0381
Language: en
Date: 1993-09-22
Title: Proposal for a COUNCIL DIRECTIVE on investor compensation schemes

27 . 11 . 93                               Official Journal of the European Communities                            No C 321 / 15
 on exploitation by fixing fishing opportunities in terms of            restricted in accordance with Article 3 must hold a
 the volume of catches and authorized fishing effort.                   fishing licence which fixes the conditions of access to
                                                                        those fisheries. Such licences shall be granted and
 3. In compliance with the general principles of the                    managed by the Member State whose flag the vessel is
 common fisheries policy, and in particular relative                    flying, in accordance with the provisions of Article 6 of
 stability, the application of Articles 4 and 8 of Regu­                Regulation (EC) No . . ./93 (licence regulation).
 lation (EEC) No 3760 /92 must take account, in each
 case, of developments in fishing opportunities, on the
 basis of the levels of fishing effort laid down in Articles                                     Article 5
 158 , 160, 164, 165 , 349, 351 and 352 of the Act of
Accession .                                                            This Regulation shall enter into force on the seventh day
                                                                       following its publication in the Official Journal of the
                                                                       European Communities.
                             Article 4
All Community fishing vessels authorized to engage in                  This Regulation shall be binding in its entirety and
fishing activities in fisheries where the exploitation rate is         directly applicable in all Member States.
                              Proposal for a Council Directive on investor compensation schemes
                                                            (93 /C 321 / 11 )
                                                   COM(93) 381 final — SYN 471
                                          (Submitted by the Commission on 22 October 1993)
THE COUNCIL OF THE EUROPEAN UNION,                                     the investment services Directive for which they have
                                                                       received authorization throughout the Community by
Having regard to the Treaty establishing the European                  establishing branches or under the freedom to provide
                                                                       services ;
Community, and in particular Article 57 (2) thereof,
                                                                      Whereas the protection of investors and the maintenance
Having regard to the proposal from the Commission,                     of confidence in the financial system is an important
                                                                       aspect of the completion of the internal market in this
In cooperation with the European Parliament,                           area ;
Having regard to the opinion of the Economic and                      Whereas the investment services Directive provides for
Social Committee,                                                  «
                                                                       prudential rules which investment firms must observe at
                                                                       all times, including rules the purpose of which is to
                                                                       protect as far as possible investors' rights in respect of
Whereas on 10 May 1993 the Council adopted Directive                   money or instruments belonging to them ;
93 /22 /EEC on investment services in the securities
field ('), hereinafter referred to as 'the investment                 Whereas, however, no system of supervision can provide
services Directive'; whereas that Directive is an essential            a complete safeguard, particularly where acts of fraud
measure for the achievement of the internal market for                 are committed ;
investment firms ;
                                                                      Whereas it is therefore important that each Member
Whereas the investment services Directive secures the                  State should have an investor compensation scheme
essential harmonization that is necessary to secure the               providing a minimum level of compensation at least to
mutual recognition of authorization and of prudential                 the smaller investor in the event that an investment firm
supervision systems, making possible the grant of a single            is unable to meet its obligations to its investor clients ;
authorization valid throughout the Community and the                  whereas such is not the case at present;
application of the principle of home Member State
supervision ; whereas, by virtue of mutual recognition,               Whereas the Commission's initial proposal for an
investment firms authorized in their home Member                      investment services Directive (2) included in the list in
States may carry on any or all of the services covered by             Article 9 of prudential rules to be observed by investment
(') OJ No L 141 , 11 . 6 . 1993 , p. 27 .                             (2) OJ No C 43 , 22. 2. 1989, p. 7.
 ---pagebreak---    No C 321 / 16                         Official Journal of the European Communities                                 27. 11 . 93
   firms and to be supervised by the home Member State's            of deposit-guarantee arrangements for credit institutions ;
   authorities membership of a general compensation                 whereas credit institutions may in certain areas be in
   scheme to protect investors ; whereas, however, the              competition with specialist investment firms ;
   Commission proposed that, pending further harmon­
   ization of compensation schemes, branches should be
   subject to the compensation scheme in force in the host          Whereas although most Member States currently have
   Member State :                                                   some investor compensation arrangements the vast
                                                                    majority do not have arrangements corresponding to the
                                                                    scope of the investment services Directive ;
  Whereas, however, this interim solution was rejected by
  the Member States in favour of a full home country               Whereas therefore all the Member States should be
  approach, given the responsibility of the home Member             required to have an investor compensation scheme, or
  State for issuing the authorization to investment firms          schemes, to which all investment firms holding the single
  and for their prudential supervision ; whereas it was             licence under the investment services Directive should
  argued that application of the home country control              belong; whereas the scheme should cover money or
  principle required that the home State compensation              instruments which are held by the investment firm in
  scheme should cover the activities carried on in host            connection with the conduct of investment business and
  Member States, through branches or via freedom to                which, following the failure of the firm, cannot be
  provide services ;                                               returned to the investor ;
                                                                   Whereas the definition of investment firm includes credit
  Whereas it was the general view that the complex issues          institutions which are authorized to provide investment
  raised by the subject of investor compensation schemes           services ; whereas such credit institutions should also be
  could be adequately dealt with only in a separate                required to participate in an investor compensation
  proposal for a directive ; whereas Article 12 of the             scheme in respect of their investment business ; whereas,
  investment services Directive does not require Member            however, in the case of investment firms which are credit
  States to have an investor compensation scheme but               institutions it may in certain cases be difficult to
  merely requires that investors be informed of the                distinguish between deposits covered pursuant to
  compensation arrangements available, if any; whereas             Directive         ./EEC on deposit-guarantee schemes
  the Commission stated that it would submit proposals on          and money held in connection with the conduct of
  the harmonization of compensation systems covering               investment business ; whereas Member States should be
  transactions by investment firms by 31 July 1993 at the          given the possibility of themselves determining under
  latest;                                                          which Directive such claims should fall ;
  Whereas the proper functioning of the internal market            Whereas Directive .../.. ./EEC on deposit-guarantee
  requires a degree of coordination in this area so that the       schemes allows Member States to dispense a credit
  small investor can purchase investment services from             institution from the obligation to belong to a deposit­
  branches of Community investment firms or on a cross­            guarantee scheme where that credit institution belongs to
  frontier basis as confidently as from domestic investment        a system which protects the credit institution itself and,
  firms, in the knowledge that a Community minimum                 in particular, ensures its solvency; whereas, where such a
                                                                   credit institution is also an investment firm, Member
  level of compensation would be available in the event of         States should also be authorized to dispense it from the
  the failure of the investment firm and its subsequent
  inability to return the investor's money or securities ;         obligation to belong to an investor compensation
                                                                   scheme ;
  Whereas in the absence of such coordination host                 Whereas the cost of investor protection has to be met by
  Member States may consider themselves justified for              investment firms but is ultimately passed on to the
  reasons of investor protection in requiring membership           investor ; whereas therefore it is undesirable to introduce
  of the host State compensation arrangement when a                throughout the Community a very high level of
  Community investment firm operating via a branch or              protection ; whereas in addition to encourage the investor
  via freedom to provide services either belongs to no             to take due care in the choice of an investment firm it is
  investor compensation scheme in its home Member State            reasonable to allow Member States to require the
  or belongs to a scheme which is not considered to offer          investor to bear a proportion of any loss ; whereas,
  equivalent protection ; whereas any such requirement             however, the investor should be covered for at least
  might create serious difficulties for the operation of the       90 % of his loss until the compensation payment reaches
  single market ;                                                  the Community minimum ;
                                                                   Whereas a harmonized minimum level of compensation
 Whereas Council Directive .../.. ./EEC on deposit­                should be sufficient to protect the interests of the smaller
  guarantee schemes introduced minimum harmonization               investor in the event of the failure of an investment firm ;
\
 ---pagebreak---  27, 11 . 93                          Official Journal of the European Communities                             No C 321 / 17
Whereas a similar level was proposed by the Commission          whether and on what conditions to admit the branches
in its amended proposal for a Council Directive                  of investment firms having their head office in third
         ./EEC on deposit-guarantee schemes ;                   countries to operate on their territory; whereas such
                                                                branches will not benefit from freedom to provide
Whereas the schemes of certain Member States currently          services by virtue of the second paragraph of Article 59
offer higher levels of cover; whereas, however, it does         of the Treaty, nor from freedom of establishment in
not seem appropriate to require that those schemes              Member States other than the one in which they are
should reduce the cover they offer;                             established ; whereas accordingly a Member State
                                                                admitting such branches may decide to oblige or permit
Whereas the retention in the Community of schemes               such branches to participate in the investor compensation
providing coverage which is higher than the harmonized          scheme in place on their territory; whereas, however, it
minimum may lead on the same territory to disparities in        is appropriate that such branches should be required to
compensation which are prejudicial to investors and             inform their investment clients of whether or not they
unequal conditions of competition between national              belong to any compensation scheme and of the extent
investment firms and the branches of firms of other             and limits of any such coverage ;
Member States ; whereas, in order to counteract these
disadvantages, branches should be allowed to join the           Whereas in conclusion a minimum harmonization of
host country scheme on a supplementary basis so that            investor compensation arrangements appears necessary in
they can offer the same level of cover as is offered by the     order to complete the internal market for investment
scheme of the country where they are located ;                  firms by giving investors confidence to deal with firms
                                                                from other Member States as well as locally incorporated
Whereas the objective of this Directive is to ensure a          firms and by avoiding the difficulties that might arise
minimum level of protection for small investors,                from the application by host Member States of their
including small and medium-sized enterprises, who have          uncoordinated         domestic       investor     protection
the greatest need of protection ; whereas, however,             requirements ; whereas a binding Community directive is
Member States should be allowed to exclude from                 the only suitable instrument to achieve the desired
coverage certain other categories of investors who have a       objective in the general absence of investor compensation
lesser need of such protection ;                                arrangements corresponding to the coverage of the
                                                                investment services Directive ; whereas this measure
Whereas a number of Member States have investor                 restricts itself to the minimum harmonization that is
compensation schemes under the responsibility of                required, allows Member States freedom to provide
professional organizations ; whereas other schemes may          wider or higher coverage if they desire and also allows
be set up and administered on a statutory basis ; whereas       Member States considerable freedom as regards the
this variety of status poses a problem only with regard to      organization and financing of investor compensation
compulsory membership of and exclusion from the                 schemes,
scheme; whereas it is therefore necessary to take steps to
limit the powers of schemes in this area ;
                                                                HAS ADOPTED THIS DIRECTIVE :
Whereas the investor should receive compensation
without excessive delay once he has established a valid
                                                                                           Article 1
claim ; whereas the compensation scheme itself should be
allowed to fix a reasonable period during which claims          For the purposes of this Directive the following defi­
should be presented ; whereas, however, the fact that           nitions shall apply :
such a period has expired should not be invoked against
an investor who for a good reason has not been able to
present his claim on time ;                                     1 . 'investment firm' shall mean an investment firm auth­
                                                                    orized in accordance with Article 3 of the investment
                                                                    services Directive, or a credit institution the authori­
Whereas investor information on compensation
arrangements is an essential element in investor                    zation of which, pursuant to Directives 77/780/EEC
                                                                    and 89/646/EEC, covers one or more of the
protection and must therefore also be the subject of a              investment services listed in Section A of the Annex t9
minimum number of binding provisions ;                              the investment services Directive ;
Whereas subject to Article 5 of the investment services
Directive and Article 9 ( 1 ) of Council Directive              2 . 'investment business' shall mean an investment service
77/780 /EEC of 12 December 1977 on the coordination                 as defined in Article 1 ( 1 ) of the investment services
of laws, regulations and administrative provisions                  Directive and the service referred to in point 1 of
relating to the taking up and pursuit of the business of            Section C of the Annex to the investment services
credit institutions (1), as last amended by Directive               Directive ;
89/646/EEC (2), Member States are free to decide
                                                                3 . 'instruments' shall mean the instruments listed in
O OJ No L 322, 17. 12. 1977, p. 30.                                 Section B of the Annex to the investment services
O OJ No L 386, 30. 12. 1989, p. 1 .                                 Directive ;
                                                                                                                             \
 ---pagebreak---  No C 321 / 18                         Official Journal of the European Communities                                 27 . 11 . 93
 4. 'investor' shall mean a person who has entrusted              4.    The   amount of an        investor's  claim  shall    be
    money or instruments to an investment firm in                 calculated on the basis of the amount of money or the
    connection with investment business .                         market value of the instruments belonging to the investor
                                                                  which the investment firm is unable to repay or return at
                                                                  the time the obligation to make repayment or return the
                                                                  instruments arises or at the time of the decision referred
                            Article 2
                                                                  to in paragraph 2 .
 1.    Each Member State shall ensure that an investor
compensation scheme (or schemes) is established and
officially recognized on its territory. No investment firm                                  Article 3
which it authorizes may carry on investment business
unless it participates in such a scheme. The scheme shall         1.    Member     States  shall   ensure   that the   scheme
provide cover to investors in respect of investment               provides for coverage of not less than ECU 20 000 per
business carried on under freedom to provide services in          investor in respect of the claims referred to in Article 2
other Member States and in respect of investment                  (2).
business carried on through branches set up by
investment firms in other Member States .
                                                                  2. Notwithstanding paragraph 1 Member States may
                                                                  provide that certain categories of investors shall be
However, Member States may exempt a credit institution            excluded from the coverage of the scheme or shall be
which is also an investment firm from belonging to an             granted a lower level of coverage. The categories in
investor compensation scheme where that credit                    question are listed in the Annex.
institution belongs to a system which protects the credit
institution itself and in particular ensures its solvency,
thus guaranteeing a protection for investors at least equi­       3. Paragraphs 1 and 2 shall not preclude the retention
valent to that provided by an investor compensation               or adoption of provisions which offer more compre­
scheme and which in the opinion of the competent auth­           hensive cover for investors, in particular by extending the
orities fulfils the conditions laid down in Article 2 ( 1 ) of   categories of investors protected by the guarantee or by
Directive .../.. ./EEC on deposit-guarantee schemes.             providing a higher level of compensation.
2.     The scheme shall provide cover to investors in            4. Member States may limit the cover provided for in
accordance with Article 3 where a decision of the                paragraph 1 or that referred to in paragraph 3 to a
scheme or of the competent authorities or of a judicial          specified percentage of the investor's claim. However,
authority in the home Member State has determined that           the percentage covered must equal or exceed 90 % of
an investment firm is unable or is likely to be unable to        the claim until the amount to be paid under the scheme
meet its obligations resulting from investors' claims            reaches ECU 20 000 .
relating to :
                                                                                           Article 4
— the repayment of money belonging to investors and
    held on their behalf in connection with investment           A branch of an investment firm authorized in another
    business, or                                                 Member State may apply to join voluntarily a scheme
                                                                 covering the category of investment firm to which it
                                                                 belongs in the Member State in which it is established in
— the return to investors of any instruments belonging           order to supplement the coverage which its investors
    to them and physically held on their behalf in               already enjoy by virtue of their obligatory coverage by
    connection with investment business, or                      the scheme referred to in Article 2 .
— the return to investors of any instruments belonging           Member States shall ensure that objective conditions
    to them and administered or arranged on their behalf         relating to the membership of these branches form part
    in connection with investment business .                     of all investor compensation schemes .
3.    Any claim under the first indent of paragraph 2 on                                   Article 5
an investment firm that is a credit institution which, in a
Member State, would be subject both to this Directive            If an investment firm required by Article 2 ( 1 ) to take
and to Directive .../.. ./EEC on deposit-guarantee               part in a scheme or one of the branches granted
schemes shall be allocated to a scheme under one or              voluntary membership pursuant to Article 4 does not
other of these Directives as that State shall consider           comply with the obligations incumbent on it as a member
appropriate. No claim in respect of a single amount shall        of the scheme, the competent authorities which issued
be eligible for compensation under both Directives.              the authorization shall be notified and, in cooperation
 ---pagebreak---   27. 11 . 93                         Official Journal of the European Communities                            No C 321 / 19
 with the managers of the scheme, shall take all appro­          with the information necessary for them to identify the
 priate measures, including the imposition of penalties, to      investor compensation scheme in which the investment
 secure compliance by the investment firm with its obli­         firm and its branches take part within the Community.
 gations.                                                        The level of coverage under the scheme shall be made
                                                                 known to investors .
 If, as a result of these measures, compliance by the            Information shall also be given on request on the
 investment firm, or branch thereof, with their obligations      conditions governing compensation and the formalities
 is not secured, the managers of the scheme may exclude         which must be fulfilled in order to obtain compensation.
the investment firm or branch, where national law auth­
orizes such exclusion and with the explicit consent of the
                                                                Member States shall ensure that investors are informed
competent authorities.
                                                                where an investment firm is excluded from an investor
                                                                compensation scheme in accordance with Article 5 .
In that case, the coverage of money or instruments
belonging to investors and held by the investment firm or       2. The information referred to in paragraph 1 shall be
branch thereof at the date of exclusion shall be main­
tained for 12 months from the date of exclusion .
                                                                made available in the official language(s) of the Member
                                                                State in which a branch is established or in which
                                                                services are provided and shall be drafted in a clear and
                                                                comprehensible form.
                          Article 6
 1.    The coverage referred in in Article 3 ( 1 ), (3) and                               Article 9
 (4) shall apply to the aggregate amount of money and
instruments belonging to the investor and held by the            1 . Actual and intending investors at branches estab­
investment firm irrespective of the number of accounts,         lished by investment firms with their registered office
the currency and the location within the Community.             outside the Community shall be provided by the
                                                                investment firm with all relevant information concerning
                                                                the compensation arrangements which cover their
                                                                investments ,
2 . The share of each investor in a joint investment
account shall be taken into account in calculating the
coverage provided for in Article 3 ( 1 ), (3) and (4).          2. The information referred to in paragraph 1 shall be
                                                                made available in the official language(s) of the Member
                                                                State in which the branch is established in the manner
In the absence of special provisions the account shall be       prescribed by national law and shall be drafted in a clear
divided equally between the investors.                          and comprehensible form.
                          Article 7                                                      Article 10
 1.    Member States shall ensure that the scheme is able       Without prejudice to any other rights which it may have
to meet an investor's claim within a maximum period of          under national law, an investor compensation scheme
three months from the date of the decision referred to in       which pays investors' claims shall be subrogated to the
Article 2 (2) if the eligibility and amount of that claim       rights of the investors in the liquidation proceedings for
have been established .                                         an amount equivalent to its payment.
                                                                                         Article 11
2. The compensation scheme shall be allowed to fix a
period of not less than six months following the decision       No later than five years after the date mentioned in
referred to in Article 2 (2) during which investors may be      Article 12 ( 1 ), the Commission shall present a report to
required to submit their claims.                                the Council on the application of this Directive, accom­
                                                                panied where appropriate by proposals for its revision.
However, the expiry of such a period may not be
invoked by the scheme in order to deny the benefit of                                    Article 12
coverage to an investor who, due to absence or for any
other good reason, has been unable to assert his claim          1 . Member States shall bring into force the laws,
under the compensation scheme in time.                          regulations and administrative provisions necessary to
                                                                comply with this Directive by 31 December 1995. They
                                                                shall forthwith inform the Commission thereof.
                          Article 8
                                                                When Member States adopt these provisions, these shall
1 . Member States shall ensure that the managers of             contain a reference to this Directive or shall be accom­
the investment firm provide actual and potential investors      panied by such reference at the time of their official
 ---pagebreak--- No C 321 / 20                             Official Journal of the European Communities                                   27. 11 . 93
publication. The procedure for such reference shall be                     administrative decisions which they adopt in the field
adopted by Member States.                                                  covered by this Directive.
                                                                                                      Article 13
2.   Member        States     shall   communicate         to    the
Commission the text of the main laws, regulations and                      This Directive is addressed to the Member States.
                                                                  ANNEX
                        LIST OF THE CATEGORIES OF INVESTORS REFERRED TO IN ARTICLE 3
              1 . Investment firms as defined in Article 1 (2) of the investment services Directive.
              2 . Credit institutions as defined in the first indent of Article 1 of Directive 77/780/EEC.
              3. Financial institutions as defined in Article 1 (6) of Directive 89/646/EEC.
              4. Insurance undertakings as defined in Article 1 of Directive 73/239/EEC or Article 1 of Directive
                  79/267/EEC or undertakings carrying on the reinsurance and retrocession activities referred to in
                  Directive 64/225 /EEC.
              5. Undertakings for collective investment in transferable securities.
              6. Pension or retirement funds.
              7. Other institutional investors.
              8 . Government and central administrative authorities.
              9. Provincial, regional, local or municipal authorities.
             10. Directors and managers of and members personally liable in the investment firm, holders of at least
                  5 % of the capital of the investment firm, members of the external auditing bodies who audit the
                  accounts of the investment firm and investors with similar status in the other companies in the same
                  group .
             11 . Close relatives and third parties acting on behalf of the investors referred to at point 10.
             12. Other companies in the same group,
             13 . Investors who have on an individual basis obtained from the investment firm rates and financial
                  concessions which have helped to aggravate the financial situation of that investment firm.
             14. Companies which are of such a size that they exceed the criteria for drawing up abridged balance
                  sheets laid down in Article 11 of Directive 78 /660/EEC, as last amended by Directive . . ./. . ./EEC.