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Financial Sector | Measures for Improving Investor Confidence |

Investor Protection

The Austrian Investor Compensation Scheme

According to the Banking Act each of the five banking associations, representing the Austrian banking industry, the joint stock banks, the savings banks, the rural co-operative Banks (Raiffeisenbanken), commercial co-operative banks (Volksbanken) and mortgage banks has to maintain a guarantee scheme. Every credit institution in Austria which accepts deposits or provides investment services specified in Art. 93 of the Banking Act is legally obliged to be member of the guarantee scheme according to the association it belongs to. Investment firms which offer investment services quoted in Art. 75 of the Securities Supervision Act have to belong to a compensation scheme specifically established for investment firms.

In principle, the guarantee, respectively the compensation schemes, cover claims up to 20.000 Euro arising out of a credit institution’s or investment firm’s inability to

  1. repay money owed to or belonging to investors and held on their behalf in connection with investment business, or
  2. return to investors any instruments belonging to them and held, administered or managed on their behalf in connection with investment business.

For details on the funding principles of guarantee schemes for credit institutions please refer to the Austrian deposit guarantee scheme. Funding of the compensation scheme of investment firms is determined within the Securities Supervision Act and in principle structured as follows: Firstly, member firms have to pay annual contributions, the amount depending on the number of their customers and their annual turnover (“ex ante funding”). Secondly, additional contributions can be requested by the compensation scheme in cases where the ex ante funding is not sufficient to meet the payment of the compensation claims (“ex post funding”). If these measures do not allow the full coverage of all guaranteed investor claims, the compensation scheme has to take out loans or issue bonds, for which the Federal Minister of Finance may assume liability.

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