"Customers who place money with investment funds through financial service companies guilty of committing crimes like fraud or which are insolvent should receive a higher compensation," according to Olle Schmidt MEP (Folkpartiet, Sweden) author of a report for the European Parliament on investor-compensation schemes due to be discussed on Monday evening at a meeting of the Economic and Monetary Affairs committee. "This draft directive will benefit those individual investors who decide to invest money in financial instruments but are badly let down by their financial intermediaries and are unable to recover the money in cases of malpractice where there is a long list of creditors."

The innovative proposal of MEP Schmidt, is "to favour a full harmonisation and fix a common level of compensation of EUR 100 000" against the Commission proposed limit of EUR 50 000, and to tackle "the current unreasonable discrepancies between Member States compensation practices."

"By fixing a common level equivalent to that already in force for bank depositors we extend consumer protection without creating the risk of arbitrage between Member States. Since investments know no borders, it is pointless to allow differences when the main goal is to complete our Single European market."

The Commission's proposal also includes enhanced protection to the securities investment fund (known as UCITS), but MEP Schmidt is proposing their exclusion from the directive on the grounds that "there is already a good protection for investment funds under existing legislation. I am concerned that the consumer will pay for such increased protection through higher fees. They may be paying twice for the protection they already have. However I think that the depositary liabilities have to be looked at in the upcoming review of the UCITS directive."

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