How long does the process of investment fund recovery take?
Loss of money in the financial system has several triggers. It can for example be the result of excessive risk taking, accidental derogation, deliberate misconduct, or even corporate failure. Where losses are incurred by the actions of the investor, recovery is often difficult. Faults of the financial adviser, intermediary or investment fund may qualify for recovery though. However, recourse and recovery cannot always be guaranteed.
Depending on the event that caused the financial loss, different strategies for recovery may apply. Regulation and legal systems protect consumers from specific conduct and fraud. Alternatively, when failure does not occur and fraud is difficult to prove, victims must find legitimate ways to settle their dispute in an out of court setting. External pressure is allowed up to certain standards, but there is a thin line between pressure and slander, libel or defamation. The latter can trigger the court to impose sanctions on the victim, the opposite of what is intended.
In matters relating to investment fraud it is important to establish the deliberate wrongful act against an investor, even better to ascertain a pattern of misconduct against a group of investors. The stronger a case against wrongdoer, the more likely it is that recovery can take place. Yet, there must be liquidity available on the side of the wrongdoer to compensate victims. This does not always resonate with reality though.
Where investment fund recovery relates to bank failure, regular bank depositors and even investors have a better position. Coordinated deposit protection schemes and investor compensation follow a strict regime. The regulation can be consulted at all times and is available online. As such, creditors can study the regime to determine their rights and see what they are entitled to. Furthermore, several legal frameworks such as company law, insolvency law and bankruptcy law define the further steps of legal action against the wrongdoer.
Even though there are several opportunities for investment fund recovery, the cross-border element is a delaying factor. Consequently, it is quite hard to determine the timeframe for recovery. Deposit protection and insurance compensation programs have a very fast turnover and can repay to qualifying creditors in a matter of weeks. Yet, legal action and regulatory intervention may take much longer. Therefore, creditors should always seek for ways to achieve out of court settlements and friendly agreements to save time.