Okategoriserad / Uncategorized 2 December 2009
On 27 November 2009, the Supreme Administrative Court issued a judgment which implies that investors can receive compensation following a securities company bankruptcy even if they closed their accounts before the bankruptcy.
This judgment more clearly defines the scope of the investor compensation scheme. It also helps establish a general practice that is well in line with the intention of the scheme to improve the protection of consumers in financial markets.
The background to these legal proceedings is a decision by the Deposit Guarantee Board (IGN) to reject an investor's application for compensation following the bankruptcy of securities company CTA Lindh & Co Scandinavia AB (CTA) in 2004.
Prior to the bankruptcy, the investor had closed his account with CTA, believing that he had recovered all his financial assets. After the bankruptcy, it transpired that CTA's information was incorrect and that the investor still had assets in the company.
As his account had been closed, the investor was no longer deemed to have a business relationship with CTA. For this reason, IGN considered that he was not encompassed by the investor compensation scheme.
Legislation difficult to interpret in the present case
The investor initially appealed against the IGN decision in the County Administrative Court and later in the Administrative Court of Appeal. Both instances confirmed IGN's decision.
By the time the proceedings reached the Supreme Administrative Court, the Debt Office had taken over IGN's tasks as guarantee authority and was consequently a party to the case.
The Supreme Administrative Court's decision is a welcome one as it was unclear how the Investor Compensation Act was to be interpreted in the case at hand. The Debt Office is now reviewing how the judgment will affect other former customers of CTA.
For further information, please contact:
Erik Sjulander, deputy head of the Guarantees and Lending Department,
+46 (0)8 613 47 51