The Securities and Exchange Commission (CySEC) today announced the initiation of the process of compensating the clients of Prior Capital CY Ltd (formerly PriorFx Ltd), which saw its license lapsed just yesterday.
The process involves the CySEC inviting clients to the claims portal for them to enter the necessary details and state their claims.
The Cypriot watchdog has wholly withdrawn the Cyprus Investment Firm (CIF) of Prior Capital, and the company was forced out of regulated business back in March.
“As per paragraph 18(1)(a) of Directive DI87-07 of 2019 for the Operation of the Investors Compensation Fund (R.A.D. 76/2019), CySEC has determined that the Company (member of the I.C.F.) for the time being, for reasons directly related to its financial circumstances, is unable to meet its obligations arising out of investors’ claims and has no early prospect of being able to do so,” the circular further states.
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Fortunately, Prior Capital is a member of the Investor Compensation Fund (ICF), which serves to protect the claims of covered clients and provide them with compensation in case a member couldn’t meet its financial obligations.
According to the CySEC’s announcement, the regulator initiates the compensation payment procedure after it has revoked the Prior Capital authorization. The company, however, is not expected to pay back its obligations in the near future for reasons directly related to its financial circumstances.
The next step, if any, will see the ICF inviting covered clients to make their claims against the company, designating the procedure for filing compensation applications and the deadline for their submission. Next, the fund publishes the details in at least two local newspapers, including the address at which investors may be informed about the progress of their applications.
The amount of the compensation payable to each client is calculated in accordance with the contractual terms governing his relationship with the faltering broker, but in general, the maximum amount doesn’t exceed €20.000.
Earlier last year, the CySEC has changed maximum compensation for valid claims to be either 90 percent of the cumulative covered claims or €20.000, whichever is lower. Therefore coverage = Min (90 percent Χ claimed amount, €20.000). This means that an investor who holds €50.000 with a CIF, which runs into trouble and is unable to pay, will get €20.000 from the ICF. However, if the claim is for €10.000, the coverage will be only 90 percent or €9.000, not 100 percent, as previously calculated.