In 1997, the EU Investor Compensation Directive laid down basic requirements for investor compensation schemes. This was done to provide a harmonised minimum level of investor protection across the European Union.
The EU left it to each individual member state to organise, finance and put in place an appropriate scheme. In Ireland, the Directive was put into Irish law on 1 August 1998 through the Investor Compensation Act, 1998 (the Act). The ICCL is an independent body set up under the Act.
In addition to transposing the Directive into Irish law, the Act provides for the establishment of the Investor Compensation Company DAC. The structure adopted in Ireland i.e. the establishment of a specialist company to put compensation arrangements in place, is one which has also been used in some other member states of the European Union.
The Act also provided for compensation arrangements to apply to a large number of investment firms, which were not covered by the Directive. This reflected the Government’s view, that eligible investors who dealt with investment firms should be entitled to some degree of financial compensation if an authorised firm failed and investors had lost funds.