The FOGAIN (whose entire legal name is FONDO GENERAL DE GARANTÍA DE INVERSIONES) is the Investors Compensation Scheme for entities providing investment services, other than credit entities (credit entities are covered by the Fondo de Garantía de Depósitos).
The FOGAIN has been established to compensate, with the quantitative limits legally established, to those clients of any of the above entities in respect of which the following occurs:
- The relevant firm becomes insolvent.
- As a consequence of that, the investor is not able to recover the moneys or securities that she/he delivered to - or put at the disposal of- the investment firm for the provision of an investment service.
The FOGAIN has been legally established as a Fund that is managed by a managing entity called the Gestora del Fondo General de Garantía de Inversiones, S.A. ("Gestora").
All Spanish investment firms, with the exception of EAFIS (Empresas de Asesoramiento Financiero) including portfolio managers (Sociedades Gestoras de Carteras), brokers (Agencias de Valores) and broker-dealers (Sociedades de Valores) are mandatory members ("Entidades Adheridas") of the FOGAIN. Becoming a member of the FOGAIN is mandatory for branches in Spain of foreign investment firms incorporated in a non-EU country. Branches in Spain of foreign investment firms incorporated in another EU country may also join the FOGAIN if they decide to do so.
In addition to the above, those Spanish UCITS Managers ("Sociedades Gestoras de Instituciones de Inversión Coleciva") and Managers of Alternative Investment Funds closed-ended type ("Sociedades Gestoras de Entidades de Inversión de Tipo Cerrado") authorised to provide discretionary portfolio management and other investment services and ancillary services to individuals, must also join the FOGAIN. In this latter cases, only those clients receiving that service will be covered by the FOGAIN. Consequently UCITS portfolios are not covered by the FOGAIN.
The FOGAIN is founded basically with the contributions made on an annual basis by its members. In addition to that, the FOGAIN may arrange credit transactions with commercial banks and with the CNMV in the event it were necessary to attend payment needs.
The FOGAIN is subject to supervision by the Spanish securities markets regulator (the Comisión Nacional del Mercado de Valores or CNMV).
To obtain a list of the entities that are currently covered by the FOGAIN please click here (Spanish only).
The coverage of the FOGAIN is triggered when one of the entities covered becomes insolvent and as a consequence of that, an investor cannot recover its securities and/or moneys.
Insolvency means that one of the following circumstances is present:
- That a Spanish judge had declared the opening of a "concurso judicial" (judicial insolvency proceedings) in respect of the firm.
- That a “concurso judicial” (judicial insolvency proceedings) has been formally asked to be declared.
- That the Spanish Securities Regulator (COMISIÓN NACIONAL DEL MERCADO DE VALORES or CNMV) issues a statement declaring that, due to the firm's financial situation, it is not able to meet its obligations vis a vis its clients.
When any of the circumstances above is present, the FOGAIN will compensate to those firm's clients that comply with certain legal requirements.
In order to be entitled to receive a compensation from the FOGAIN an investor must fulfil the following conditions:
- The investor must be a client of the insolvent firm at the date in which the insolvency declaration.
- The investor must have a credit balance of moneys or securities with the insolvent firm at the date in which the insolvency is declared. The moneys and securities may have been delivered to the firm for deposit/custody purposes or may have been put at the firm's disposal in the ambit of a discretionary portfolio management contract.
- The investor's circumstances must not fall within those that determine the exclusion from the FOGAIN's coverage. The investors excluded from the FOGAIN's coverage (i.e. with no right to obtain a compensation from the FOGAIN) are the following:
- Investment firms.
- Entities forming part of the insolvent firm's economic group.
- Credit entities.
- Insurance companies.
- UCITS (Undertakings for Collective Investment in Transferable Securities) and UCITS Managers.
- Pension funds and pension funds managers.
- Venture capital entities and their managers.
- Any entity that, according to the laws and regulations applicable to it, carry out any of the activities listed above.
- Public administration bodies.
- Managers and directors of the insolvent firm. Persons empowered by the insolvent firm. Shareholders of the insolvent firm holding at least 5% of the stock capital. The auditor of the insolvent firm. Any person or entity that fulfil any of these conditions in respect of any entity belonging to the insolvent firm's group. Couple of any of the above as well as his/her first degree relatives.
- Any person or entity that is directly or indirectly responsible for the insolvent situation of the firm as well as those that are beneficiaries of insolvent firm's acts that have caused its insolvency. Any entity or person acting in concert with them.
- Persons or entities that have not complied with anti money laundering legal provissions. Any entity or person acting in concert with them.
- Any person or entity that have committed a crime in its relationship with the insolvent investment firm. Any entity or person acting in concert with them.
If you are an investor, and you think that you are entitled to obtain a compensation from the FOGAIN according to that stated in the previous Section, you may deliver an application form to the SOCIEDAD GESTORA DEL FONDO GENERAL DE GARANTÍA DE INVERSIONES, S.A. (which is the company that manages the FOGAIN) attaching a copy of your updated identification card.
The form can be delivered directly in the offices of the FOGAIN, attaching a copy of it so that you can keep a registered copy with you.
You can also send the form with copy of it attached, to the FOGAIN offices by courier or by mail. The FOGAIN will, in this latter case, send you back a registered copy of your form.
The address of the FOGAIN offices are the following: Paseo de la Habana, 82, 1º Dcha, 28036 MADRID, Spain.
Once the FOGAIN had received your application form, it will conduct a number of checking activities to assert that you had a credit position vis a vis the insolvent firm and you have not been able to recover it. To this end, the FOGAIN may request from you the remittance of additional documentation or additional information. Please note that conducting these checking activities is mandatory for the FOGAIN and that it may take some time to finish them.
Once the FOGAIN has checked that you have a credit position vis a vis the insolvent firm, and provided that you are not one of the investors excluded from the coverage of the FOGAIN, you will be recognized to have a right to a compensation, and will be informed of the relevant amount.
In the event that you do not agree with the FOGAIN resolution, you may let it know and provide the FOGAIN with any additional documents or allegations you may deemed appropriate.
Any final resolution by the FOGAIN is subject to revision of the ordinary Courts.