Where does the ICF's money come from, and how must it be invested?

Members provide most of the money. They pay an initial contribution when they join, set by the investment services they applied to CySEC for, and a regular annual contribution based on their audited yearly statement of the eligible funds and financial instruments they hold for covered clients. If the Fund gives written, reasoned notice that its liquid money is not enough, CySEC may decide to call extraordinary contributions. Members also pay fees towards the Fund's administrative and other costs.

Other resources are income from the Fund's investments, donations and other sources, unclaimed client money, and client money transferred to the Fund under CySEC's directive on suspending and withdrawing licences. Transferred money becomes a Fund resource 3 years after the transfer; until then the Fund holds it as custodian. All of the Fund's capital is available to compensate the covered clients of any member.

Beyond the exam material, DI87-07 also fixes the amounts. The initial contribution is €2,000 for each investment service and €35,000 for the ancillary service of safekeeping and administration. The annual contribution is 5‰ of eligible funds and instruments when the audited statement, due by 10 May, carries a clean opinion and any errors have been corrected, and higher otherwise. Each member also pays a yearly fee of €700, or €100 if it holds no client assets.

Contributions and fees do not belong to the members, so the Fund does not refund them. There are two exceptions: an overpayment caused by miscalculating the current year's contribution, and the case where a firm applied to join but CySEC then rejected its licence application, when the initial contribution is refunded at the applicant's cost.

The Fund may borrow from banks in Cyprus or abroad, but only with CySEC's consent and only when the Management Committee judges that its liquid money will not cover payments that are due or likely. It then informs the Minister of Finance and, within one month, calls an extraordinary contribution equal to the loan. With CySEC's consent it may also insure all or part of its obligations to covered clients, and it may pass the premiums on to members in proportion.

At least 70% of the Fund's total assets must be placed in readily realisable government bonds or bills of a Member State, in interest-bearing accounts with banks operating in Cyprus or another Member State, or in an ICF account at the Central Bank of Cyprus. CySEC may allow a lower share to pay for reinsurance. At least 10% must be kept in interest-bearing sight, or current, accounts with banks operating in Cyprus.

A member may pay a client's money to the Fund without breaching the client-money rules only if three conditions are met. It has held the money for at least 6 years since the last movement on the account, counting deposits and withdrawals but not interest, fees or charges. It can show it took reasonable steps to trace and repay the client. These must include checking contact details, writing, trying again by another channel and sending a final notice, with a month for a reply each time. And its board undertakes to pay an equal amount to the client or an heir who claims later. The money becomes an unclaimed-funds resource of the Fund, not a contribution by the member. The wider client-money rules are in How must an investment firm safeguard client money and financial instruments?.