Investor Protection: Safeguarding Your Securities
Capital invested in financial instruments such as stocks, mutual funds, and bonds is covered by investor protection. This framework ensures that if a financial institution goes bankrupt, you can receive compensation for your securities held in custody.
Investing involves risk.
How Investor Protection Works at Quartal
Investor protection is designed to safeguard assets defined under the Swedish Securities Market Act. While cash deposits in bank accounts are typically covered by the government deposit guarantee, your investments in securities are protected by this specific investor compensation framework.
Dual Protection: Finnish and Swedish Frameworks
Because Quartal is headquartered in Finland, our customers benefit from a combination of the Finnish Investor Compensation Fund and the Swedish investor protection system.
- Finnish Protection: Provides compensation up to 20,000 EUR per customer and institution.
- Swedish Protection: Acts as a complement, ensuring that customers are entitled to compensation up to 250,000 SEK.
Compensation is triggered if an institution becomes insolvent and the Finnish Financial Supervisory Authority determines that the inability to pay is not temporary.
Protection for Mutual Funds
The protection for mutual funds differs from individual securities because the structure of a fund inherently minimizes counterparty risk. As a fund unit holder, your assets are protected by:
- Separate Assets: A fund’s capital is legally separated from the fund management company’s own assets. This means the assets cannot be seized by creditors if the management company faces financial difficulties.
- Independent Custody: An independent custodian institution is responsible for monitoring and protecting the fund’s assets. If a custodian institution loses these assets through negligence or insolvency, they have a strict liability to provide compensation.
- Limited Liability: You can never lose more than your total invested amount.
When Are You Entitled to Compensation?
Compensation is triggered only after a formal decision by the Finnish Financial Supervisory Authority. If a service provider faces permanent payment difficulties, the authority must decide within 21 days whether the compensation fund is obliged to pay out. Once a decision is made, payments must generally be completed within three to six months.
What is Not Covered?
Investor protection specifically covers the loss of securities due to an institution’s insolvency. It does not cover:
- Losses resulting from market fluctuations or poor investment performance.
- Assets that are already covered by the government deposit guarantee (such as cash in certain service accounts).
For further information, you can visit the official websites of the Finnish Financial Supervisory Authority and the Swedish National Debt Office.
