How it works

How does the FCMC protection mechanism work?

In accordance with Article 3, Part 2, Point 4 of the Investor Protection Law of the Republic of Latvia in case the investment brokerage company cannot fulfill its obligations against the investor, the investor is entitled to compensation in the amount of 90% of the value of irretrievably lost financial instruments or losses caused by an unexecuted investment service, but not more than EUR 20,000.

Financial and Capital Market Commission (hereinafter – Commission) ensures the payment of compensation. Compensation will be paid out only to the investors who have submitted an application for irreversible disappearance of financial instruments or losses caused by an unfulfilled investment service to the Commission within 1 year from the acknowledgment that the investment brokerage company cannot fulfill its obligations, but not later than 5 years after the investment brokerage company has not fulfilled its obligations. The Commission examines the application within 30 days from its receipt and issues a decision. In case of a decision on payment of the compensation, the compensation shall be paid out within 3 months from the date of the decision. The amount of the compensation is determined as follows:

(1) for irreversible disappearance of financial instruments - in accordance with the market price of financial instruments owned by the investor on the day when an application for irreversible disappearance of financial instruments was submitted to the Commission, but, if the market price on the day the application is submitted cannot be determined, the market price of the last available financial instrument before the date of the application shall be used; and

(2) in the case of an unfulfilled investment service - in accordance with the losses caused to the investor by the unfulfilled investment service. For certain investors specified by law, such as professional investors, persons related to the investment brokerage company, and their relatives, etc., compensation is not paid.

More information can be found in the Investor Protection Law of the Republic of Latvia and on the official website of the Commission.

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