The Système d’indemnisation des investisseurs Luxembourg (SIIL, Investor Compensation Scheme Luxembourg) covers clients of investment firms, banks, management companies and AIFMs whose authorisation extends to the provision of investment portfolio management services on an individualised and discretionary basis. All these institutions are members of the SIIL.
Deposits are not covered by the SIIL, the Fonds de garantie des dépôts Luxembourg (FGDL, Luxembourg Deposit Guarantee Fund) is in charge of covering them. In the event of failure of a member of the SIIL, financial instruments such as securities held on behalf of clients do not fall within the liquidation assets, and must be returned to the client. However, it may turn out that some of these financial instruments have vanished due to e.g fraud or administrative negligence.
In this case, the SIIL covers the compensation of clients up to an amount of EUR 20,000 per person and per institution. Clients must be compensated as soon as possible and no later than three months after the amount and entitlement to reimbursement have been established.
To benefit from the SIIL guarantee, aggrieved clients are required to contact the SIIL at the postal address (L-2860 Luxembourg) or by e-mail (firstname.lastname@example.org) within 10 years of the date on which the CSSF determined that the institution does not seem to be able to fulfil its obligations resulting from claims of investors, or when the Tribunal d’arrondissement (District Court) in Luxembourg sitting in commercial matters ordered the suspension of payments or the winding-up of the failing institution. It should be noted that the SIIL does not hedge the market value loss of financial instruments.
Joint investment operations
The SIIL takes into account in the calculation of the coverage of each client’s share. In the absence of specific provisions, receivables are distributed equally among clients.
Claims relating to a joint investment transaction in which at least two persons have rights in their capacity as shareholders of a company, member of an association or any group of a similar nature, not having legal personality, shall, for the purpose of calculating the indemnity, be grouped and treated as if they resulted from an investment made by a single investor and only one indemnity shall be payable under the cover.
Article 195(2) of the Law of 18 December 2015 on the default of credit institutions and certain investment firms lists in detail the claims resulting from investment transactions excluded from any coverage under the SIIL.
Essentially, it should be noted that the SIIL does not cover professional and/or institutional investors such as UCITS or financial institutions, legal persons other than SMEs, investors directly or indirectly linked to the failure of the SIIL member, or persons convicted of an offence related to money laundering or terrorist financing.
Circular CSSF-CPDI 16/02 clarifies the notion of financial institution.