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CAPCO is an
insurance company licensed by the state of Vermont.
CAPCO provides to participating firms extra
protection for institutional and individual
clients' securities accounts over and above
that provided, in the UK, by the Financial Services
Compensation Scheme (“FSCS”) and,
in the US, the Securities Investor Protection
Act (“SIPA”) which is administered
by the Securities Investor Protection Corporation
(“SIPC”).
The protection offered by the CAPCO Surety Bond
is similar to the protection that has previously
been available from the domestic United States
insurance market, known as Excess SIPC protection.
Broadly, the protection provided to clients
of UK participating firms by the CAPCO Excess
FSCS Surety Bond ("Excess FSCS protection")
is intended to protect such clients from the
loss of cash or securities deposited with a
participating firm in the event that the firm
becomes insolvent and is unable to return clients’
assets to them. The Bond is intended to recover only lost assets; it will not meet any other
claims (for example, in negligence) that the
client may have against the participating firm.
Credit institutions may not participate in CAPCO's
Excess FSCS protection.
CAPCO has been capitalized
by its member firms and has a very strong
reinsurance program consisting of two monoline
financial guaranty reinsurers, one of which is rated AAA and one of which is rated A by Standard and Poor's.
The securities
broker/dealer referred to as the “Principal”
in the CAPCO Excess FSCS Surety Bond issued
to that Principal (the “Bond”) may
also be referred to as the “Insured”
under the Bond. But it is the “Investors”
(as clients of the Principal are defined in
the Bond) using the Principal, rather than the
Principal itself, who are the beneficiaries
of CAPCO’s payment obligations under the
Bond. Subject to the terms and conditions of
the Bond, its protection is generally available
to all Investors, individual and institutional,
even those who are ineligible for compensation
by the FSCS. The coverage of the Bond is described
in more detail in the sections below.
Under the
Bond, an Investor is a client of the participating
firm (including a prime brokerage client and
a broker-dealer client), or any of that client’s
personal representatives, agents or successors.
The Bond also provides that where a client of
the participating firm acts as intermediary
(including as agent or trustee) on behalf of
its own customers, each such customer is also
an Investor.
Yes, subject
to the terms and conditions generally applicable
to Investors.
No, all Investors
using the Principal are eligible for coverage
under the Bond, subject to its terms. However,
the protection does not apply to all losses.
For example, it does not apply to any loss that
arises directly or indirectly through fraudulent,
dishonest, or wrongful acts on the part of the
Investor, or through any such act to which the
Investor has contributed, or any claim which
has been rejected by the FSCS or an insolvency
practitioner.
Yes. Although
the FSCS provides coverage for a wide range
of products and will also compensate Investors
for certain of the Principal’s liabilities
(such as negligence) in certain circumstances,
the Bond covers only lost cash and securities.
Yes, provided
such assets are included in the definition of
"security," as defined in the United
States' Security Investor Protection Act of
1970 (SIPA), as amended from time to time (including
such securities falling within the definitions
of Title Transfer Collateral Arrangement or
Right of Use, as defined in the Bond). See www.sipc.org
for information regarding SIPA.
There is no
specific monetary limit to the protection that
CAPCO provides to Investor accounts. CAPCO’s
protection is designed to cover the difference
between the total value of the Investor’s
cash and securities deposited with the Principal
(less any liabilities owed by the Investor to
the Principal) as at the date the Principal
is deemed to be in default or becomes insolvent,
and the total sum the Investor is able to recover
from other sources (including any compensation
received from the FSCS and client money recovered
by you). Where the Investor is eligible to be
compensated by the FSCS, the Bond will pay all
sums in excess of the FSCS maximum level of
protection (currently £50,000); however,
the FSCS may pay only pay 90% of your losses
above a certain threshold, and the 10% which
is not compensated by the FSCS is also ineligible
as a claim under the Bond. Other limitations
are contained in exclusions and conditions in
the Bond.
The Bond has
a one-year term. It can be cancelled during
this time by CAPCO if there is a change in FSCS
rules that would affect the coverage provided
by the Bond. In such a case, CAPCO must give
the Principal 90 days prior written notice before
any cancellation is effective. If there is a
material misrepresentation in the information
furnished to CAPCO by the Principal in applying
for the Bond, there may be no coverage under
the Bond at all.
Yes. If any
rules affecting the payment of compensation
by the FSCS are altered so as to affect the
protection afforded by the Bond, CAPCO has the
option of accepting the alterations, renegotiating
the Bond with the Principal, or cancelling the
Bond upon 90 days’ notice to the Principal.
See www.fscs.org.uk
for information regarding the FSCS.
It is solely
the Principal’s responsibility to notify
its Investors of the cancellation of coverage,
unless a succeeding company provides similar
replacement protections without a lapse in coverage.
The Bond is
issued for a one-year term and requires an annual
underwriting review.
CAPCO provides
coverage for only one line of business, so it
is not subject to potential losses in other
lines of insurance. CAPCO provides protection
which is not subject to a monetary limitation
for any one Investor account or in total upon
the default or insolvency of the Principal.
CAPCO is licensed
by the state of Vermont to write Excess SIPC
protection. As noted above, CAPCO has been capitalized
by its member firms and has a very
strong reinsurance program.
There have
been very few, if any, Excess SIPC claims paid
by any insurance carrier since this type of
protection was first offered in the marketplace.
As a newly formed company, CAPCO has no experience
responding to Excess SIPC or Excess FSCS protection
claims. Accordingly, CAPCO has retained service
providers with claims experience in many other
lines of insurance to assist in the event claims
are incurred. In order to facilitate an orderly
and timely claims process in the unlikely event
of a claim, CAPCO and its advisors have designed
a comprehensive claim form which is available
for client review on CAPCO's website www.capcoexcess.com.
The Investor
should follow the claims submission procedures
specified in CAPCO's Surety Bond Claim Form,
a copy of which is provided on the CAPCO website
www.capcoexcess.com.
Claims under the Bond may
be submitted as late as six months after the
date upon which the final dividend/ distribution
of all the Principal’s assets has been
declared by the Practitioner.
CAPCO will
make payment or deliver replacement securities
promptly after the final dividend/distribution
of all the Principal’s assets has been
declared and paid to the Principal’s creditors
by the Practitioner, subject to satisfaction
of all terms and conditions of the Surety Bond:
in particular, you have to use reasonable endeavours
to recover your claim from the FSCS and other
sources first.
NOTE: Nothing
contained in this document is to be read as
a representation, term or warranty by CAPCO.
This document is intended to provide a broad
overview for investors and is not intended to
bind CAPCO in any way. For full terms of coverage,
you are referred to the wording of the Bond
a copy of which is available on CAPCO’s
website: www.capcoexcess.com.
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What is the Customer Asset Protection Company
(CAPCO)?