Degiro Compensation Scheme

Newentrant12

Just wanted to point out to everyone that an email query with the Dutch regulator has revealed that Degiro is not protected by the Dutch compensation scheme. In the event of degiro collapsing your funds are not protected by the regulator. On degiros website it appears that they state "firms like degiro" are eligible for the compensation scheme. Key word there is like. More worrying is that on a recent Q&A on this site they said they were in fact covered by the scheme. Just wanted to bring this to everyone's attention.

Sabre Man

Did you e-mail DeGiro and tell them what the regulator said?

evolving_doors

Newentrant12 wrote: »

Yes, no response. Don't really expect one, I'm not taking their word for it anyway. I've already seen less than professional conduct from their customer service staff or marketing people, I highly doubt they understand the legal structure of the comany. For me i will take my information from the regulator only. I imagine someone running a scam isn't going to admit to it because I email them. Lots issues outstanding like the fact you don't actually own the shares you "buy"

If you don't own the shares you buy then it's just gambling, So zero tax to pay on winnings no!?

scheister

Newentrant12 wrote: »

Yes, no response. Don't really expect one, I'm not taking their word for it anyway. I've already seen less than professional conduct from their customer service staff or marketing people, I highly doubt they understand the legal structure of the comany. For me i will take my information from the regulator only. I imagine someone running a scam isn't going to admit to it because I email them. Lots issues outstanding like the fact you don't actually own the shares you "buy"

you dont own the shares??

daheff

I'd imagine that DeGiro is down as the owner of the shares (in trust for you).

It would be a common enough scenario in financial services world. Key thing to remember is that if DeGiro went belly up, as you don't own the shares then the shares would be used by the liquidator to settle outstanding liabilities of the company. You would only get a portion of your invested funds back (if at all).

daheff

Gebgbegb wrote: »

If you don't own the shares you buy then it's just gambling, So zero tax to pay on winnings no!?

That would be an interesting debate to have with Revenue :cool:

Newentrant12

daheff wrote: »

I'd imagine that DeGiro is down as the owner of the shares (in trust for you).

It would be a common enough scenario in financial services world. Key thing to remember is that if DeGiro went belly up, as you don't own the shares then the shares would be used by the liquidator to settle outstanding liabilities of the company. You would only get a portion of your invested funds back (if at all).

Yes nowadays the broker is "owner" of the shares as far as registration. The point I was referring to was that rumours have been coming up that Degiro is only offering you synthetic versions of shares. However I'm still looking into this. The wording in their contracts is an absolute mess. They love to use the term "firms like degiro" or "most investment firms". I'm in the process of communicating with the Dutch regulator and I will post my findings on here.

keane2097

Just going to post up some of the text from their websites with the links in case people want to dig in themselves:

4. SAFE AND RELIABLE ONLINE BROKER

DEGIRO has been a reliable partner for professional investors in the Netherlands for a number of years. We already process billions in transactions every year via our in-house infrastructure. Our technology is fully compliant with regulatory banking standards. DEGIRO operates under the regulatory supervision of De Nederlandsche Bank (DNB) and the Financial Markets Authority (AFM). However, in contrast to a traditional banking environment, at DEGIRO you do not have to worry about our creditworthiness. All client funds are safely segregated and held within a separate legal entity in the form of a security giro system and a separate custody company.

https://www.degiro.ie/why-degiro.htmll

Are my investments safe with DEGIRO?
At DEGIRO we segregate client’s assets from the assets of DEGIRO. This means your assets are held within a separate legal entity, and this separation means that in the unlikely event of DEGIRO going into liquidation your assets will not be included in this liquidation. DEGIRO uses Beleggersgiro as an agent to hold assets, this agent is passive and performs no other function than to hold these assets. Your assets are therefore held in the safest way possible.

Who monitors DEGIRO?
DEGIRO is an investment firm and as such is under the supervision of The Netherlands AFM (Financial Markets Authority) and prudential supervision of the Dutch Central Bank (De Nederlandsche Bank).

What is a Cash Fund?

DEGIRO is not a bank but an investment company. A bank may use the money that clients keep with it for its own business purposes, loans to third parties and other investments. If this goes wrong, your money is lost. You therefore run a risk with the bank. For this reason the deposit guarantee system is available. Because DEGIRO is not a bank, DEGIRO may not use the money that it holds for its clients for its own investments. All money flows run via Beleggersgiro. DEGIRO immediately exchanges money that you transfer to the Central Account of Beleggersgiro for Units in one of the FundShare Cash Funds.The prospectuses can be viewed there. These are investment funds that aim, with as little risk as possible, to achieve a yield that is slightly below the regular market rate in the currency concerned. All assets in the Cash Funds are held completely segregated by a custodian who is independent from the manager of that fund and run no risk in the event of any mandatory liquidation of DEGIRO or of the manager. Your money is therefore just as safe at DEGIRO as your investments.

https://www.degiro.ie/helpcenter/faq/security/910

It seems to address the fact that its not part of the compensation scheme there FWIW.

Just want to say fair play to newentrant for digging into this.

AlmightyCushion

keane2097 wrote: »

Just going to post up some of the text from their websites with the links in case people want to dig in themselves:





It seems to address the fact that its not part of the compensation scheme there FWIW.

Just want to say fair play to newentrant for digging into this.

Going by this Degiro seems like a fairly safe bet. If they go tits up, your money and investments are safe. The only real risk is if they go tits up, there may be a delay getting your cash/shares from Beleggersgiro and if this coincides with a market crash then the value of your shares could drop a lot by the time you get them out of Beleggersgiro.

Is there any increased risk of going with Degiro over another more established broker? Apart from the fact they are newer, so there is probably an increased chance of them going under.

daheff

Question to ask -are Beleggersgiro covered by any compensation scheme?

What if they go bust?

Newentrant12 wrote: »

The point I was referring to was that rumours have been coming up that Degiro is only offering you synthetic versions of shares. However I'm still looking into this.

this would be key consideration for people. If this was the case, then it would appear (to me in anyways) that you are actually spreadbetting (meaning no taxable gains) -but without need for margins? I guess DeGiro would be using your cash as collateral/margin for the position then.

Be very interested to hear the outcome of this. Could be why they can afford to charge such low fees.

valoren

If I buy one share of say General Electric common stock through any Irish broker then I am not the owner of the stock at all. All I would be is the beneficiary. The money used by me from my bank account would be held in custody through a nominee account where all clients money would be pooled together. Seems like this is what DeGiro are doing with Beleggersgiro acting as a seperate custodian with a nostro USD account (in which there would be millions) with someone like HSBC called of 'DE GIRO IRELAND REGISTERED NYSE USD' or something like that?

Isn't that what the established brokers do already. The idea of you not owning the shares originates from the fact that your name does not appear on the GE shareholder registered list at all. It would be listed as DE GIRO IRELAND REGISTERED NYSE USD It's only held for you by the broker, and they charge you handsome custody charge commissions for themselves for buying and selling transactions. Call me an old cynic but there is always the possibility that this is scare mongering to get people to cash out from de giro and go back to getting fleeced by 'established' and 'safe' brokers?

AlmightyCushion

daheff wrote: »

Question to ask -are Beleggersgiro covered by any compensation scheme?

What if they go bust?

Can they go bust?

DEGIRO uses Beleggersgiro as an agent to hold assets, this agent is passive and performs no other function than to hold these assets.

If they don't do anything except hold onto assets, can they actually or realistically go bust?

Newentrant12

valoren wrote: »

If I buy one share of say General Electric common stock through any Irish broker then I am not the owner of the stock at all. All I would be is the beneficiary. The money used by me from my bank account would be held in custody through a nominee account where all clients money would be pooled together. Seems like this is what DeGiro are doing with Beleggersgiro acting as a seperate custodian with a nostro USD account (in which there would be millions) with someone like HSBC called of 'DE GIRO IRELAND REGISTERED NYSE USD' or something like that?

Isn't that what the established brokers do already. The idea of you not owning the shares originates from the fact that your name does not appear on the GE shareholder registered list at all. It would be listed as DE GIRO IRELAND REGISTERED NYSE USD It's only held for you by the broker, and they charge you handsome custody charge commissions for themselves for buying and selling transactions. Call me an old cynic but there is always the possibility that this is scare mongering to get people to cash out from de giro and go back to getting fleeced by 'established' and 'safe' brokers?

The issue I am bringing up is whether or not they are actually shares or not, or if they are synthetic. But the main issue is have is there standing with the Dutch regulator and their place in the investor compensation scheme. If they aren't in this scheme the fact they are lying about being in it, is even more an issue. Also a few comments on your post. 1 degiro isn't registered in Ireland it's passported from the Netherlands 2. They charge no custody fee 3. I have no interest in promoting irish local brokers I despise them, I want degiro to be the real deal. But if people are trusting them with a signifincant amount of money, due diligence must take place.

keane2097

Newentrant12 wrote: »

The issue I am bringing up is whether or not they are actually shares or not, or if they are synthetic. But the main issue is have is there standing with the Dutch regulator and their place in the investor compensation scheme. If they aren't in this scheme the fact they are lying about being in it, is even more an issue. Also a few comments on your post. 1 degiro isn't registered in Ireland it's passported from the Netherlands 2. They charge no custody fee 3. I have no interest in promoting irish local brokers I despise them, I want degiro to be the real deal. But if people are trusting them with a signifincant amount of money, due diligence must take place.

Do you have a link to the page where they are doing the jiggery-pokery with language re: the compensation scheme?

evolving_doors

Just wondering why you became involved with degiro OP? Like I doubt you're just an ordinary Joe browsing the net one night and then come across degiro t&c's and decided to question and pursue the point out of public interest.

Who do you use yourself?

irish_investr

A beleggersgiro is not a company, its a transparent, segregated custody. Every bank/broker has one. Your shares are held there and if Degiro goes bust the shares cannot be claimed by the creditors. As for cash, Degiro is not a bank therefore money on account does not fall under the guarantee scheme. Degiro mitigates this through the Cash Funds, which also are segregated. SAFER than money in the bank.
RE: the "synthetic shares" discussion. Sounds like the shares of all the customers are aggregated into a single custody account, and a database used to keep track of who owns what. Standard.

76544567

This makes me worried. I have a hell of a lot of money with degiro. Getting worried about the safety of the funds now.

Newentrant12

I have contacted the Dutch Regulator and they have confirmed to me that Degiro is a licensed investment firm and licensed financial service provider. They stated that due to Degiros structure of segregation that it shouldn't be necessary to use the Investor Compensation Scheme. But they followed up by linking me to a DNB (Dutch Central Bank) article on the investor compensation scheme which they asked me to refer to for more information, this stated that :
"Which financial institutions participate in the ICS?
Investment firms authorised by the Netherlands Authority for the Financial Markets (Autoriteit Financiële Markten - AFM) for provision of investment services."

This implies that they are in fact covered by the dutch investor compensation scheme. I have followed up asking the AFM to inform me as to whether periodic audits take place by the AFM on Degiro to ensure asset segregation takes place and also to definitely state that in the even that loss occurs due to assets not being segregated would the AFM provide compensation under the ICS. I will post the response I receive to this forum.
The AFM confirming the registration and licensing of Degiro as a Dutch investment service provider implies that the terms of service contract that any of you entered into on creation of the account has been reviewed by the AFM or at the very least is binding in a Dutch court. On review of the contract:

Where are my assets?
2.2 Beleggersgiro DEGIRO uses Beleggersgiro to hold Financial Instruments other than Units for Client. Beleggersgiro is a passive entity (a foundation) that does nothing else but holding Financial Instruments and money. In this way, the positions in Financial Instruments and money are separated from the capital of DEGIRO and remain available for the customers of DEGIRO, even after insolvency of DEGIRO.


But if I don’t have the shares registered, where is my ownership i.e do I have shareholder rights? – You do but degiro will hit you with an admin fee if you wish to exercise them.
6.9 Voting right Subject to instruction of Client, neither DEGIRO nor Beleggersgiro will utilise the voting right to Securities held on behalf of Client. On request of Client, DEGIRO will endeavour to procure that Client obtains the right to attend the shareholder meeting and the right to vote with respect to the Securities held for the account of Client. Such a request needs to be made by Client to DEGIRO no later than twenty Trading Days prior to the meeting concerned, and/or if a registration date has been set for the purpose of the voting, no later than ten Trading Days before the registration date. DEGIRO will charge Client a fee and the costs that DEGIRO makes for this service.



And finally the reason I started this little crusade for all retail investors in Ireland
15.8 Investor compensation scheme DEGIRO falls under the Netherlands investor compensation scheme, the BCS. The BCS protects individuals and 'small' companies who have confided money or Financial Instruments to a licensed investment company. The BCS compensates under conditions stipulated by law the loss of the investor up to the maximum amount of EUR 20,000 per person if the investment company cannot meet its obligations after it has been declared bankrupt.


In relation to the rumors of shares being purchased not being actual shares, Degiro responded to me saying this is false and that shares do in fact mean real registered shares. They also stated that if you open a custody account you won't even have the option to trade in synthetics (CFDs) or other derivatives. There are a lot of links I would like to post to help people on this forum check the registry and how investors can lodge complaints with the regulator against Degiro in the case of wrongdoing or seek more information from dutch regulators, as well as the link to the original email correspondence with the regulator which lead me to begin these posts, but this website won't allow me to post links as i'm a newentrant. I could pm a longer time board user with the resource links if he wishes to post them on here. I will be posting more information on Degiro as I obtain it from the dutch regulators .

Newentrant12

More Jurisdiction information in case this broker causes problems for us:
17.2 KIFID If in the opinion of Client the dispute has not been satisfactorily solved in the internal procedure, Client can present the dispute to the Klachteninstituut Financiële Dienstverlening Kifid. DEGIRO is a member of the KiFiD under membership number 400.000.343.
17.3 Applicable law The contractual relationship, as well as questions about the existence and formation thereof, between Client and DEGIRO and Beleggersgiro are governed exclusively by the laws of The Netherlands.
17.4 Competent judge Parties agree that other than to KiFiD, disputes between Parties will be presented exclusively to the competent judge in Amsterdam, The Netherlands.

Newentrant12

Is the custodian account safer? – what does this really mean? Well I gather this is the difference between Beleggersgiro Long Short(non custody) and Beleggersgiro Long Only (custody) – this concerns the right of use of primer brokers (i.e custodian, provider of margin for clients who decide to take leverage etc.)

4.5 Use by third parties Insofar as third parties, such as clearing members and prime brokers, where DEGIRO and Beleggersgiro Long Short hold positions in money and Financial Instruments on behalf of Client require a security right or right of use with respect to these Financial Instruments, Client hereby gives DEGIRO the explicit approval to grant this right to these third parties. A right of use of the third parties concerned means that at the level of that third party, there is no segregation of assets. As a result, damage can be caused in case of bankruptcy of the third party concerned. DEGIRO makes sure that this risk is limited by carefully selecting and monitoring the third parties it involves, by distributing positions over several third parties and by requiring security or judicial protection, such as the right of close out netting. All positions in Financial Instruments that are - at any given moment - in use by a third party, will be allocated by DEGIRO in the administration of DEGIRO or Beleggersgiro Long Short, pro rata to their holdings to the customers for whose account DEGIRO or Beleggersgiro Long Short holds the respective Financial Instruments on the respective account with that third party. In relation to Securities that are held by Beleggersgiro Long Only, no right of use will be granted.

Newentrant12

irish_investr wrote: »

A beleggersgiro is not a company, its a transparent, segregated custody. Every bank/broker has one. Your shares are held there and if Degiro goes bust the shares cannot be claimed by the creditors. As for cash, Degiro is not a bank therefore money on account does not fall under the guarantee scheme. Degiro mitigates this through the Cash Funds, which also are segregated. SAFER than money in the bank.
RE: the "synthetic shares" discussion. Sounds like the shares of all the customers are aggregated into a single custody account, and a database used to keep track of who owns what. Standard.

The money and assets apparently do fall under the compensation scheme. To provide more information on where assets are held: There is no one custody account per say, there are several prime brokerages who act as custodians,clearing services and margin providers where necessary.

Newentrant12

Gebgbegb wrote: »

Just wondering why you became involved with degiro OP? Like I doubt you're just an ordinary Joe browsing the net one night and then come across degiro t&c's and decided to question and pursue the point out of public interest.

Who do you use yourself?

Nobody likes to consider themselves an ordinary joe. I became involved with Degiro because I am a retail investor who happens to currently live in Ireland, my only involvement with them is as a potential client. I am not promoting any brokers as an alternative i'm simply researching the lowest cost broker in my market and posting information I gather online for other consumers.

evolving_doors

Newentrant12 wrote: »

Nobody likes to consider themselves an ordinary joe. I became involved with Degiro because I am a retail investor who happens to currently live in Ireland, my only involvement with them is as a potential client. I am not promoting any brokers as an alternative i'm simply researching the lowest cost broker in my market and posting information I gather online for other consumers.

OK just wondering thanks, you seemed pretty concerned considering you've no account with them. But I appreciate the research.

Your last few posts seem to be more positive and suggest that a customer 'does' actually own the shares and 'are' covered by the compensation scheme. Would this be correct in saying?

Newentrant12

Gebgbegb wrote: »

OK just wondering thanks, you seemed pretty concerned considering you've no account with them. But I appreciate the research.

Your last few posts seem to be more positive and suggest that a customer 'does' actually own the shares and 'are' covered by the compensation scheme. Would this be correct in saying?

Yes I talked again with the dutch regulator recently and they confirmed again that they supervise Degiro regularly. In the event of any wrongdoing from Degiro they would issue a public warning and in serious cases they would pull the license.

evolving_doors

Newentrant12 wrote: »

Yes I talked again with the dutch regulator recently and they confirmed again that they supervise Degiro regularly. In the event of any wrongdoing from Degiro they would issue a public warning and in serious cases they would pull the license.

So you reckon they're kosher?

Newentrant12

Gebgbegb wrote: »

So you reckon they're kosher?

It appears they're as kosher as the other stockbrokers in Ireland. I guess it comes down to if you trust the Dutch or Irish regulators more to supervise. Heres a link to the AFM registry so you can keep an eye on them:

https://www.afm.nl/en/professionals/registers/alle-huidige-registers/beleggingsonderneming.aspx?id=3708F58C-68A1-E011-A203-005056BE6692&q=degiro

Johnny Jukebox

Newentrant12 wrote: »

It appears they're as kosher as the other stockbrokers in Ireland. I guess it comes down to if you trust the Dutch or Irish regulators more to supervise.

Yeah, that's a difficult choice..:rolleyes:

cooperguy

Just wanted to say, I have been keeping an eye on this thread and appreciate all the information!

benjydagg

cooperguy wrote: »

Just wanted to say, I have been keeping an eye on this thread and appreciate all the information!

I also have been following and appreciate all information.

lucky john

cooperguy wrote: »

Just wanted to say, I have been keeping an eye on this thread and appreciate all the information!

As my present broker (Merrion) doesn't want my business any more I have read this tread with interest as I was researching DeGiro. Good work Newentrant12.
Thanks.

res ipsa

lucky john wrote: »

As my present broker (Merrion) doesn't want my business any more I have read this tread with interest as I was researching DeGiro. Good work Newentrant12.
Thanks.

Just signed up with DG today. Fyi you need a PPS number & your IBAN. Next job to transfer funds.

bigblackstar

I too have followed the thread and very much appreciate the information. Thanks NewEntrant for your efforts!