Protection of financial instruments market clients (investors)
As from 1 January 2002, the Investor Protection Law has been in force in Latvia providing a system of protection for investors. In cases when the providers of investment services (banks, investment management companies and investment firms) are incapable of fulfilling their contractual obligations, investors have the right to receive compensation. Failure to meet obligations is compensated at 90% of the irrevocably lost value of financial instruments, or of losses incurred by the non-performance of investment services.
As from 2008, compensation at 90% of the irrevocably lost value of financial instruments, or of losses incurred by the non-performance of investment services was guaranteed for an investor, but not more than EUR 20 000.
Contrary to accumulation of funds, the investor protection mechanism developed by DGF and FPI prescribes that funding meant for compensation has not been accumulated in the fund, but in cases when an investment service provider fails to fulfil obligations, the Commission, on the basis of quarterly reports on financial instruments portfolio submitted by other market participants, calculates proportion of payment by every market participant, investment service provider, in the account opened with the Bank of Latvia for guaranteeing compensations.
If necessary, the Commission organizes and monitors payments of market participants for compensations, examines validity of compensation claims and ensures payment of compensation.