Romanian Investors Compensation Fund - General Presentation - About - - PDF document

FONDUL DE COMPENSARE A INVESTITORILOR S.A. B-dul CAROL I nr. 34–36, etaj 3, cod postal 020922, sector 2, Bucuresti, Tel: 40–21–315.73.48, Fax: 40–21– 315.73.40, e-mail: office@fond-fci.ro,web: www.fond-fci.ro

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Romanian Investors Compensation Fund

• General Presentation -

About the Fund

The Romanian Investors Compensation Fund (Fondul de Compensare a Investitorilor) or the Fund is a legal person established as a joint-stock company according to its articles of incorporation, preliminary approved by the Financial Supervisory Authority (Autoritatea de Supraveghere Financiara - ASF).

Mission

Managing a solid compensation scheme aimed at contributing to the increase of investors’ trust and participation to the Romanian capital market

Values

• Responsibility to the investors and the protection of their interests
• Strong cooperation with the members of the Fund, the regulatory authority and the

financial institutions

• Confidentiality of information received from the members of the Fund

Origin of the Fund

In March 1997, the Directive 97/9/EC in relation to the establishment of investor compensation schemes was published. The directive, known as the Investment Compensation Scheme Directive (the ICD) is as an integral part of the framework for the establishment of a single market in financial services and stemmed from another directive, Council Directive 93/22/EEC on investment services in the securities field. The Directive 93/22/EEC, replaced by Directive 2004/39/EC on markets in financial instruments (MiFID) at the 1st of November 2007, laid down certain regulatory and prudential rules governing investment firms throughout the EU. These rules aimed to protect investors’ money and securities. In this case, an investor is defined as any natural or legal person who has entrusted money or financial instruments to an investment firm in connection with investment business. However, the Directive 93/22/EEC did not offer protection to investors in cases where insolvency resulted in the inability of an investment firm to return securities or money to investors. In order to surpass this shortcoming, the purpose of the ICD was to provide a minimum level of protection for investors in such circumstances. The ICD provides a compensation limit of EUR 20,000 for each investor. In this matter, Romania negotiated with the European Union transitional arrangements, so that this compensation limit will be reached in 2012. Under the Directive 97/9/EC, the Member States could exercise discretion as to the organisational structure and financing of the investor compensation schemes. Consequently, a variety of

• wnership, funding arrangements and members contributions could be observed across the EU.

The establishment of the investors compensation schemes was considered a measure of building trust and investors’ participation in the financial system.

FONDUL DE COMPENSARE A INVESTITORILOR S.A. B-dul CAROL I nr. 34–36, etaj 3, cod postal 020922, sector 2, Bucuresti, Tel: 40–21–315.73.48, Fax: 40–21– 315.73.40, e-mail: office@fond-fci.ro,web: www.fond-fci.ro

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Scope of the Fund

In Romania, the Fund was set up in June 2005, with the purpose of compensating investors, if Fund members fail to return the money and/or the financial instruments owed by or belonging to investors, which have been held on their behalf for providing investment services or managing individual investment portfolios.

Object of activity

The Fund’s main object of activity is to collect contributions from the members and to pay out compensation to the investors when a member fails to return the money and/or the financial instruments owed by or belonging to investors, which have been held and/or managed on their behalf for the provision of investment services, up to the compensation limit established according to the regulations issued by ASF.

Ownership of the Fund

When the Fund was established in 2005, it had 73 founders: 60 investment companies, 10 management companies, 1 intermediary - credit institution, as well as the Bucharest Stock Exchange and the RASDAQ Electronic Stock Exchange. The initial share capital amounted 109,500 lei. At present, the share capital of the Fund amounts 344,350 lei (approximately EUR 95,000) according to a number of 34,435 nominative shares, with a nominal value of 10 lei. According to the legal framework into force, the Fund’s shareholders are the intermediaries and the management companies which have as their regular business the management of individual investment portfolios. Moreover, the market operators, the central depository and other entities regulated and supervised by ASF may be shareholders of the Fund. The list of shareholders at the moment is on the site (http://www.fond-fci.ro/en/ About the Fund / Shareholders / Shareholders' Registry).

Legal framework

The Fund carries out its activity according to:

• the provisions of its articles of incorporation authorised by ASF;
• the Law no.31/1990 on trade companies, republished, with further modifications and

completions;

• the Capital Market Law no. 297/2004, with further modifications and completions;
• the Regulation no.3/2006 regarding the authorisation, organisation and functioning of the

Investors Compensation Fund, issued by ASF, with further modifications and completions;

• the Procedures of the Fund;
• the Romanian legal framework into force.

Management of the Fund

The Fund is managed by a Management Board elected by the general meeting of shareholders for a four-year term of office. The Management Board consists of 3 members, legal persons authorised and supervised by ASF, shareholders of the Fund, on the basis of a management contract. The President of the Management Board is elected by the ordinary general meeting of shareholders. The members of the Management Board appoint the Executive Manager who is in charge of the regular activity of the Fund.

FONDUL DE COMPENSARE A INVESTITORILOR S.A. B-dul CAROL I nr. 34–36, etaj 3, cod postal 020922, sector 2, Bucuresti, Tel: 40–21–315.73.48, Fax: 40–21– 315.73.40, e-mail: office@fond-fci.ro,web: www.fond-fci.ro

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Members of the Fund

All the intermediaries authorised to provide investment services and management companies, which manage individual investment portfolios, are required to be members of the Fund. The intermediaries and the management companies authorised in other Member States of the European Union, as well as their branches which provide investment services or manage individual portfolios in Romania on the basis of the free movement of services may be members of the Fund. Additional membership of the Romanian Investors Compensation Fund can only be considered in

• rder to supplement the cover of the claims of investors provided by the schemes of their home

countries if the compensation limit and the cover provided by the Fund is more comprehensive. The list of members at the moment is on the site (http://www.fond-fci.ro/en/ Members of the Fund).

Financial resources

In order to ensure the financial resources for the compensation payments and the functioning of the Fund, the members have to pay to the Fund the initial and the annual contribution. Consequently, the investors are not involved in the collection of the financial resources of the Fund. To become a member of the Fund, an intermediary authorised to provide investment services or a management company, which manage individual investment portfolios, must pay the initial contribution to the Fund. The initial contribution represents 1% of the minimum initial capital required by the legislative framework regarding the capital market, according to the business activity authorised, but not less than the “lei” equivalent of EUR 1,000. The annual contributions paid by the members of the Fund are calculated by applying the percentage rate on the calculation basis. The percentage rate is fixed by the Management Board of the Fund before March 1st of each calendar year. The calculation basis is determined as follows: a) for members - intermediaries, the calculation basis is the income from the fees charged to clients for the transactions with financial instruments and for the custody and administration of financial instruments; b) for members - management companies, the calculation basis is the income from the management of individual investment portfolios, excluding the income from the management of pension funds; c) for members – branches of the intermediaries and of the management companies authorised in

• ther non-EU Member States and for the intermediaries and the management companies

authorised in other EU Member States, as well as their branches, the calculation basis is the income made in Romania from the transactions with financial instruments, the custody and administration

• f financial instruments and the management of individual investment portfolios.

The annual contribution has to be paid before June 1st of each year according to the accounting records available at December 31st of the previous year. The annual contribution payable by a member cannot be less than EUR 1,000. If the financial resources of the Fund are not sufficient for the investors’ compensation payments, each member has to pay a special contribution. However, the special contribution may not exceed twice the amount of the most recent annual contribution levied for a member. Should the resources are still insufficient to cover the liabilities, the Fund may contract short term loans in order to cover exclusively the costs for compensation payments.

FONDUL DE COMPENSARE A INVESTITORILOR S.A. B-dul CAROL I nr. 34–36, etaj 3, cod postal 020922, sector 2, Bucuresti, Tel: 40–21–315.73.48, Fax: 40–21– 315.73.40, e-mail: office@fond-fci.ro,web: www.fond-fci.ro

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The administrative and other expenses connected to the management of the Fund are covered by the proceeds from investments of the contributions collected from the members (initial and annual contribution). Starting with January 1st 2009, the Fund may collect contributions for administrative expenses. The Fund does not pay dividends and cannot grant loans. In case the Fund makes a profit, the amount is tax-free and it is used to increase the financial resources of the Fund as well as to cover the administrative and operating expenses. The registered auditor of the Fund is Mazars Romania.

Regulatory authority

The regulatory authority of the Fund is the Financial Supervisory Authority (Autoritatea de Supraveghere Financiara - ASF). As the supervision and control authority, ASF has the following functions:

• to validate the representatives of the legal persons elected in the Management Board and

the Executive Manager of the Fund;

• to decide on the authorisation and the amendment of the Procedures of the Fund;
• to approve the increase, the decrease, the suspension or the resumption of the members’

contribution payments to the Fund;

• to impose penalties against the member who failed to fulfil or did not perform adequately

the payment obligation or the obligation to submit the documents and the information requested by the Fund;

• to establish the investors’ compensation limit;
• to authorise the articles of incorporation and the Regulation regarding the organisation and

functioning of the Investors Compensation Fund as well as any modifications and completions thereof etc. Moreover, the Fund is required to submit to ASF an annual report of activities.

Compensation limit

The Fund compensates the investors taking into consideration the principles of equal treatment and non-discrimination up to the compensation limit provided in the Directive 97/9/EC on investor compensation schemes, representing the “lei” equivalent of EUR 20,000 for each investor. The level of coverage of an investor’s claim is 100%.

Investors compensation

The Fund compensates the investors in any of the following situations: a) ASF has acknowledged that, for the time being, from its point of view, a Fund member, for reasons directly linked to its financial situation, is not able to meet its obligations resulted from investors’ claims and furthermore, there is no possibility for the member to meet these obligations in the shortest time possible; b) the competent legal authority, for reasons directly or indirectly linked to the financial situation of a Fund member, has issued a final decision that has as a result the suspension of investors from the possibility of exercising their rights as regards the resolution of their claims against the said company. In order to recover the payments made for the compensation of funds and/or financial instruments, the Fund shall subrogate de jure to the investors’ rights. Consequently, the Fund shall be recorded in the creditors’ committee with an amount equal to the payments made for the compensation in the event of its member’s winding up.

FONDUL DE COMPENSARE A INVESTITORILOR S.A. B-dul CAROL I nr. 34–36, etaj 3, cod postal 020922, sector 2, Bucuresti, Tel: 40–21–315.73.48, Fax: 40–21– 315.73.40, e-mail: office@fond-fci.ro,web: www.fond-fci.ro

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Investors excluded from compensation

The Directive 97/9/EC on investor compensation schemes allows the exclusion of certain categories of investors from being eligible to claim compensation. In Romania, all exclusions that are allowed under the Directive are applied. Consequently, the following categories of investors are excluded from compensation: a) Professional and institutional investors, including:

• investment firms as defined in the law regarding credit institutions and the capital

adequacy;

• credit institutions as defined in the law regarding credit institutions and the capital

adequacy;

• financial institutions as defined in the law regarding credit institutions and the capital

adequacy;

• insurance undertakings;
• collective-investment undertakings;
• pension funds;
• other professional and institutional investors set out by ASF regulations.

b) international institutions, governments and other central administrative authorities; c) regional and local administrative authorities; d) administrators, including managers, directors and other relevant persons, persons whose responsibility is to audit the Fund’s members, their shareholders with holdings that exceed 5% of the share capital, as well as investors with a similar position within other companies of the same group as the Fund’s members; e) spouses, first rank relatives and in-laws as well as the persons acting on behalf of the international institutions, governments and other central administrative authorities; f) other legal persons in the same group as Fund’s members; g) investors who have any responsibility for or have taken advantage of certain facts relating to a Fund’s member which gave rise to the member’s financial difficulties or contributed to the deterioration of its financial situation; h) companies which are of such a size that they are not permitted to draw up abridged balance sheets according to the accounting principles into force. Contact details:

Fondul de Compensare a Investitorilor S.A. Address: B-dul CAROL I nr. 34-36, etaj 3, cod postal 020922, sector 2, Bucharest, Romania Tel: + 40-21-315 73 48; Fax: + 40-21-315 73 40 Bank: Transilvania Bank – Lipscani Branch IBAN Code: RO82 BTRL 0410 1202 6286 61XX Single Registration Code: 18005590 E-mail: office@fond-fci.ro ; Website: www.fond-fci.ro