In short: investor protection is the set of rules, supervision and the compensation scheme that protect clients if an investment firm breaks the rules or cannot return their money and instruments — but not from market losses.
Simply put: There are three layers. Rules for the firm (MiFID II): fair information, suitability checks, keeping client assets separate. Supervision and licensing. And a compensation scheme under Directive 97/9/EC — at least €20,000 per investor when the firm is insolvent; countries may set a higher level.
Example: A firm goes bust and cannot return a client's assets worth €30,000. The Bulgarian fund pays 90% — €27,000 — but no more than 40,000 leva (≈ €20,452). The client receives ≈ €20,452.
Watch out: if the price of your shares has fallen, no scheme compensates the loss. Supervision checks rules, not results.
Example: Bulgaria — the Investor Compensation Fund pays 90% of the claim, but no more than 40,000 leva (≈ €20,452 at the fixed rate of 1.95583); its website states the amount only in leva.
Check in your country — which body runs your national investor compensation scheme, what share of a claim it pays and up to what limit.
Source: Directive 97/9/EC, Art. 4(1) — https://eur-lex.europa.eu/eli/dir/1997/9/oj; Investor Compensation Fund (Bulgaria) — https://sfund-bg.com