Poland’s compensation scheme has been in operation since January 2001. The scheme operates under the Act of 29 July 2005
on Trading in Financial Instruments, which implements Directive 97/9/EC of the European Parliament and of the Council on investor-compensation schemes. The compensation scheme is operated, administered and managed by Krajowy Depozyt Papierów Wartościowych S.A. (KDPW), the Central Securities Depository of Poland.
The compensation scheme and KDPW are both supervised by Polish Financial Supervision Authority (KNF)
KDPW actively co-operates with the local market supervisor and with participants of the financial market in order to strengthen the confidence of investors in the capital market and to optimise the model of the scheme itself, which protects the interests of retail investors in the event of the insolvency or bankruptcy of a broker. Since 2018 KDPW is a member of the European Forum
of Deposit Insurers (EFDI), a non-profit association of European deposit insurance and investor compensation schemes. EFDI has 72 members including two Polish institutions KDPW which administers the Compensation Scheme and Bankowy Fundusz Gwarancyjny (Bank Guarantee Fund).
The compensation scheme collects assets for payment of compensation to retail investors whose assets are lost. The scheme covers cash and financial instruments held by investors up to a certain limit. Investment losses are not covered by the compensation scheme. Participation in Poland’s compensation scheme is mandatory for licensed providers of brokerage services covered by the scheme. Participants of the scheme include brokerage houses, banks with brokerage licences, custodian banks, and mutual fund managers. The scheme currently has more than 100 participants.
Assets covered by the compensation scheme are capped at EUR 22,000; 100% is paid in compensation up to EUR 3,000 and 90% compensation is paid over EUR 3,000; the total compensation per investor is limited to EUR 20,100.
Assets of the compensation scheme include contributions of scheme participants as well as returns on investment of assets of the scheme by KDPW. The contributions of scheme participants depend on the value of investor cash and financial instruments invested with the participant and are set as a percentage of that value. If compensation is paid in excess of the value of assets in the scheme, KDPW may call the participants to make additional contributions up to an amount defined in the regulations.
The Rules of operation of the compensation scheme
At present, the assets of the compensation scheme are valued at approximately EUR 51.5 million.
The main functions of KDPW as the operator of the compensation scheme include:
- to determine the percentage rate of annual contributions of the compensation scheme participants;
- to accept annual contributions;
- to invest the assets of the scheme;
- to review and monitor compensation paid to investors, and to pay out compensation;
- to report to participants and the Polish Financial Supervision Authority.
There have been three instances of compensation scheme participant default since the inception of the compensation scheme in Poland. Compensation was paid out to investors in two of those instances. The payment of compensation is pending in the third case.
Information for aggrieved parties
following the declaration of insolvency of FIRST INTERNATIONAL TRADERS DOM MAKLERSKI S.A.