How are investments protected at a broker in the EU/ Romania

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mairwaves
Posts: 2
Joined: Sat Sep 17, 2022 2:06 pm

How are investments protected at a broker in the EU/ Romania

Post by mairwaves »

I'm taking the advise on another thread to re-state a question I had: if I am in Romania and investing for the long term (local and international assets), what protections do I have with the respective brokers? What do I do if one day the online platform is no longer live? I am currently using both local platforms (Tradeville, Investonline) and international ones (IBKR).

Hoping there is some knowledge on this in the community as I have no clue, and wonder if I'm placing my investments in a safe place. Any recommendations of low-cost brokers also welcome
Laurizas
Posts: 442
Joined: Mon Dec 31, 2018 4:44 am
Location: Lithuania

Re: How are investments protected at a broker in the EU/ Romania

Post by Laurizas »

mairwaves wrote: Tue Sep 20, 2022 8:43 am what protections do I have with the respective brokers?
Depends on broker's jurisdiction: EU states - 20 000 Euros, UK - 85 000 pounds, US - 250 000 USD.
mairwaves wrote: Tue Sep 20, 2022 8:43 am What do I do if one day the online platform is no longer live?
To make a claim to competent authority:
UK - https://www.fscs.org.uk/what-we-cover/investments/
USA - https://www.fdic.gov/
Ireland - https://www.investorcompensation.ie/
jg12345
Posts: 273
Joined: Fri Dec 11, 2020 1:03 pm

Re: How are investments protected at a broker in the EU/ Romania

Post by jg12345 »

Laurizas wrote: Thu Sep 22, 2022 8:16 am
mairwaves wrote: Tue Sep 20, 2022 8:43 am what protections do I have with the respective brokers?
Depends on broker's jurisdiction: EU states - 20 000 Euros, UK - 85 000 pounds, US - 250 000 USD.
mairwaves wrote: Tue Sep 20, 2022 8:43 am What do I do if one day the online platform is no longer live?
To make a claim to competent authority:
UK - https://www.fscs.org.uk/what-we-cover/investments/
USA - https://www.fdic.gov/
Ireland - https://www.investorcompensation.ie/
In UK I believe most if not all brokers have FSCS protection. However, be careful that your broker is indeed covered. there exist e-money institutions (although I believe they can only be provider of payment services), they are not protected by FSCS, and have to put other measures in place. https://www.fca.org.uk/consumers/using- ... -providers

And in Italy for example there's a protection of 100k EUR from your bank on cash deposits, so if your broker is a bank then cash is protected until 100k.

Degiro is another low cost broker that covers up to 20000

Also note that those protections refer to cash. your stocks should be under "segregation", in other words another company holds your stocks, not your broker, so that if your broker is going bankrupt it should be harder to do nasty stuff with your stocks in an attempt to save itself from going out of business.
glorat
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Joined: Thu Apr 18, 2019 2:17 am

Re: How are investments protected at a broker in the EU/ Romania

Post by glorat »

Brokers don't actually hold your assets - they are just facilitating you to perform buys/sells. The upshot is that if a broker goes under, this doesn't affect your assets. Assets instead are held by Custodians on your behalf. If you take your broker statement to the right parties, they'll be able to locate your assets at the Custodian.

So the real questions you need to think about are who are the custodians your broker are using, where are they, how reputable are they and how is the segregation of assets managed. Regulations also matters as that covers how brokers interact with custodians and how brokers report back to clients via broker statements.

I use IBKR as my broker and did my due diligence on the above and was satisfied, which is why I use them. But you'll need to check this for every broker in their jurisdiction to be sure. (E.g. IBKR HK is not IBKR SG)

Then onto government insurance, which is what the above talks about. It is NOT the case that if the broker goes bust, you lose all your money and then you get to claim all that loss from because, as I said, if a broker goes bust your funds are still intact. To quote the FSCS coverage "We may be able to protect you if a provider goes out of business and there's a shortfall in the money or assets it's holding for you". Note the "and".
Stork
Posts: 94
Joined: Wed Feb 17, 2021 10:44 am
Location: EU

Re: How are investments protected at a broker in the EU/ Romania

Post by Stork »

I am happy to repost this as it is the best overview I have seen of what to consider: https://www.bankeronwheels.com/how-to-c ... ck-broker/

The amount protected varies by country within the EU, in both Spain and France it is more than 20k
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