The protection of investors and the maintenance of confidence in the capital market are essential to ensure proper functioning of the internal European market. It is within this framework that Directive 97/9/EC of the European Parliament and of the Council of 3 March 1997 provided that it is essential, to that end, for each Member State to have one or more investor-compensation schemes. Investor-compensation schemes guarantee a harmonized minimum level of protection at least for the small investor in the event of an investment firm being unable to meet its obligations to its investor clients arising out of investment services.
The “Investment Guarantee Fund” with the distinctive title “Guarantee Fund” is a legal person under private law operating as a non-profit Guarantor, having its seat in Athens and is governed by provisions of Articles 1 and 61 – 78 in L. 2533/1997 (GG [FEK] 228/11.11.1997, issue Α’) transposing Directive 97/7/EC into the Greek laws. The Guarantee Fund operates under the supervision of the Hellenic Capital Market Commission and being a legal person under private law is not subject to any provision setting restrictions for legal persons under public law.
It was established pursuant to Legislative Decree 3078/11.10.1954 under the name “Joint Trading Transactions Guarantee Fund” and is one of the oldest ones across Europe.
The “Guarantee Fund” compensates investor clients for investment services provided by investment firms authorized to provide such services under the supervision of the competent Supervisory Authorities, i.e., the below:
- Investment Services Firms – Athens Stock Exchange Members,
- Credit Institutions authorized to provide investment services – Athens Stock Exchange Members participating in the Guarantee Fund and not in the Investment Cover Scheme (ICS) of the Hellenic Deposit and Investment Guarantee Fund (TEKE),
- Investment Services Undertakings – non-Athens Stock Exchange Members.
- Mutual Funds Management Companies (M.F.M.C) authorized to provide services set out in Article 4 para. 2 in Law 3283/2004 – non-Athens Stock Exchange Members, and
- any other investment services business that under provisions in law must participate in the Guarantee Fund.
The above firms make their contributions to the “Investment Guarantee Fund” in line with the provisions of Article 71 in Law 2533/1997, as in force.
Recovery and resolution of investment firms is set out in Directive 2014/59/EU and has been transposed into the Greek laws through provisions of Articles 94 – 117 paras. 1 and 3 in L. 4335/2015 (GG [FEK] 87 / 23.07.2015 issue Α’).
The Guarantee Fund was designated as Resolution Fund for Investment Services Firms falling within the above provisions and is utilized by the Resolution Authority of the Hellenic Capital Market Commission solely and only to the extent required to ensure effective enforcement of measures of resolution in respect of those firms.
To that end, an independent function has been created within the Capital of the Guarantee Fund under the above provisions, funded by contributions of Investment Services Firms to which resolution measures apply.
The “Guarantee Fund” has been operating in Greece
Α. as an Investor-compensation Scheme in line with Directive 97/9/EC of the European Parliament and of the Council of 3 March 1997 “on investor compensation schemes” transposed in the Greek laws through provisions of Articles 1 and 61 – 78 in L. 2533/1997 (GG [FEK] 228/11.11.1997 issue Α’). Article 2 of the above Directive provides for the establishment and functioning of an investor-compensation scheme in each Member State. The purpose of an investor-compensation scheme is to compensate investors for services received by investment undertakings operating in each Member State and providing investment services.
Β. as a Resolution Fund for Investment Services Firms in line with Directive 2014/59/EU of the European Parliament and of the Council of May 15 2014 establishing a framework for the recovery and resolution of credit institutions and investment firm transposed in the Greek laws through provisions of Articles 94 – 117 paras. 1 and 3 in L. 4335/2015 (GG [FEK] 87 / 23.07.2015 issue Α’). The purpose of this Directive is to harmonize resolution procedures in the institutions at Union level, to deal effectively with unsound or failing credit institutions to safeguard financial stability, minimize economic and social consequences in the Member States where these institutions operate.
Structure and functions
In the following section, three key axes are presented regarding the structure and the function of the Guarantee Fund.