How to choose a broker and what happens if it fails

This session describes the Spanish system, the one that applies if you open your account in Spain. Two checks aren't optional before opening one: that the firm appears in the official registers, and knowing whether your shares sit in your name or inside a pooled account. The first takes two minutes; the second almost nobody looks at, and it decides how much work it takes to get your own back if the broker fails.

How to check a broker is authorised

By searching its name in the official registers of the CNMV (Comisión Nacional del Mercado de Valores), the public body that oversees the Spanish stock markets and anyone selling investments there. They're public and free, and any firm providing investment services in Spain has to appear there.

The two places it can appear

Spanish firms. Securities companies and agencies authorised directly by the CNMV. They show up in the corresponding register with their registration number.

European firms. A broker authorised elsewhere in the European Economic Area — the EU plus Iceland, Liechtenstein and Norway — can operate here through EU passporting, without asking for a second authorisation. It still appears in Spanish registers, in this second place, which holds two lists: firms that open a branch here, and firms that serve from their home country without one.

That distinction decides who checks the broker can stay standing.

A Spanish firm answers to the CNMV; a European one to its home regulator. To complain about how it treated you in Spain, the CNMV is your way in for both.

The reverse check, which resolves things fastest

The CNMV also maintains a list of warned firms: companies offering investment services without authorisation. It's the first place to look if something raises doubts.

One criterion settles almost every case: the CNMV never offers you investments, never invites you to invest or charges you for doing so, and never asks you for personal data over the phone. Any communication claiming to come from the regulator with an opportunity is fake by definition.

Where your shares really are

Your shares can be registered in your name, or sit inside a pooled account where the broker tracks how much is yours.

The two arrangements, and how they differ

Registered in your name. The shares list you as holder in the register of the depository, the firm whose job is to record officially who owns each share. That's standard at traditional Spanish brokers and banks.

Omnibus account. The broker appears as holder of one large pool of shares, and its books record which portion belongs to each client. It's legal, very common at international brokers, and often one of the reasons they can charge less.

Why it matters

Under normal conditions it matters not at all: you buy, sell, collect dividends, and notice nothing. It matters on the day the broker runs into serious trouble.

That day, with shares in your name your ownership is recorded externally to them. With an omnibus account it depends on their internal records being correct and current.

The law requires client assets to be segregated in both cases, but reconstructing who owns what is more direct when your name is on it.

Ruling out a broker for using omnibus accounts is overdoing it: almost everyone uses one without trouble. What changes is knowing which you have, and letting that weigh alongside the fee.

What happens if the broker fails, and what FOGAIN covers

Your shares aren't the broker's: they're yours, and it only holds them: it keeps them and records that you're the owner. If it fails, the rules provide for them to be moved to another firm. FOGAIN (Spain's General Investment Guarantee Fund) exists for when that breaks down.

First: asset segregation

Your securities are not part of the broker's estate. If it fails, the law gives you a right of separation: they are yours, they don't go into the pot shared among its creditors — the people it owes money to — and you can ask for them to be moved elsewhere. That right holds in an omnibus account too; there, who owns what is fixed by the broker's internal book. And if the shares the firm holds don't stretch to all its clients, what there is gets shared out in proportion and for the shortfall you join the queue of creditors.

Cash takes a different route, because it doesn't stay at the broker: it sits in an account the broker opens at a bank. It's covered by the Deposit Guarantee Fund, the Spanish fund that answers when a bank fails — that bank, not the broker.

And when that fails: FOGAIN

The fund covers up to €100,000 per client and entity, and only in two scenarios: a court putting the firm into insolvency proceedings, or the CNMV declaring that it cannot return the money and securities you entrusted to it.

And note who it covers: FOGAIN answers for securities companies and agencies and for fund managers, not for banks. If your broker is a bank, your securities are answered for by the Deposit Guarantee Fund, also up to €100,000, and separately from the other €100,000 covering your cash.

The Spanish legal cap is always the same, €100,000 per client and entity; what changes is which fund pays.

Three more:

What it doesn't cover. Market losses. If your shares fall 40%, FOGAIN doesn't step in: that's the risk you accepted by investing.

It's per entity. With €80,000 at one broker and €80,000 at another, if both failed each would have its own cap.

It depends where the firm is authorised. A European broker operating here on a passport is covered by its home country's fund, not by FOGAIN. And there the cap can be lower: the CNMV warns that the European floor is €20,000, well below Spain's €100,000.

And if you simply want to switch brokers

You don't need to sell anything. There's a securities transfer: your shares move from one firm to another keeping their original purchase price and date.

If you sold everything to repurchase at the new broker, you'd be generating a capital gain — the profit from selling something for more than it cost you — taxable that same year, on top of paying the commissions twice and twice what it costs to get in and out of the market, which is never zero, billed or not.

With a transfer you change custodian but you don't sell: they are still the same shares. And Spanish income tax only taxes a gain when the composition of your holdings changes. No sale, no taxable event: the thing that makes the tax arise never happens.

Your purchase date matters because, when you do sell, the tax authority treats the shares you bought first as the ones sold: if those were the cheapest, the gain you declare is bigger. You give the instruction yourself, and you can give it at either your current broker or the new one.

The CNMV puts the process at a few business days, though with foreign securities involved it can take longer. And the transfer fee is charged by the broker you're leaving, not the one receiving you.

Spanish or foreign broker: what changes on your tax return

This difference is the one that generates the most work. A Spanish broker does a good chunk of the tax side for you; a foreign one leaves you all of it.

What a Spanish broker does

It withholds on dividends when paying them: it keeps back part of the cash and pays it to Spain's tax agency on account of what you'll end up owing. It also reports your transactions to that agency and gives you an annual tax certificate. In practice, much of your data appears pre-filled in your draft tax return, which the agency hands you already completed each spring.

What a foreign one doesn't do

It doesn't withhold, doesn't report to the Spanish tax agency, and often doesn't give you the information in the format you need. That means three things:

You declare it. Gains, losses, and dividends have to be entered manually.

Form 720 may apply. What counts isn't where the company is from, but where your shares are kept: with over €50,000 deposited, managed or obtained abroad, the Spanish tax agency requires a report. Apple shares kept at a Spanish broker don't count; the same shares at a foreign broker do.

It only requires you to file the form again when the combined value has risen by more than €20,000 over the figure that triggered the last declaration you filed; on top of that, it must always be filed for any holdings you ceased to own as of 31 December.

The conversion work is yours. Spain's Directorate-General for Taxation, the arm of the tax administration that rules on how taxes are read, says that if your broker settles in dollars the gain is worked out in dollars.

Only the result crosses into euros, at the rate on the day of the sale. Made-up numbers: buy for $1,000, sell for $1,200, gain $200; those $200 are what you convert. Turning your dollars into euros later is a separate operation with its own gain or loss: two calculations instead of one, and with two hundred trades a year it's a problem.

A foreign broker isn't a bad idea because of this: comparing fees also means adding the time, or the advisor's cost, this work takes every spring.

Full detail on how each item is taxed sits in the guide to investment taxation in Spain.

What you gain and lose with a low-commission broker

You gain access: low fees, fractions of a share from tiny amounts, and an app built for a phone. Watch those fractions: ESMA, the EU markets supervisor, warned in March 2023 that many are a derivative, not a slice of a share — a contract with the broker, in no register in your name. You lose, depending which you pick, tools and order types.

What a broker that doesn't charge you lives on

If a service charges you no commission, its revenue comes from somewhere else. These are the four:

Execution spread. For years a firm that buys and sells on its own account paid the broker to route your orders to it, and recovered that payment through the price it filled them at. You put it up without seeing it: not on your bill, in the price.

The European Union banned it with Regulation (EU) 2024/791 of 28 February 2024, and since 30 June 2026 not a single exemption remains. It's still legal in the United States, so with a broker outside the EU the question still stands.

Currency conversion. Buying US stocks from euros requires a conversion, and there's usually margin in it even when the trade is "free."

Interest on cash. Money sitting idle in your account generates interest the firm keeps, in whole or in part.

Add-on products. Leverage, securities lending — the broker lends your shares for a fee — and premium accounts, taken out separately.

Of the four, the first has been banned and the other three are legal. The problem is not knowing which applies, because it determines where your money actually goes. The next session puts numbers on it.

What falls outside the simplified package

Advanced order types, direct access to certain exchanges, analysis tools and, sometimes, a properly downloadable history for your tax return.

What these brokers don't give you is context. They solved access very well (buying is easy, cheap, and instant) and didn't solve understanding what you buy. The screen shows you a price, a chart, and a button.

That's where Volatly fits: it isn't a broker, doesn't hold your money, doesn't execute trades, and doesn't replace the one you already use.

It runs alongside it and supplies what your broker's app doesn't: what events are coming for the assets you follow, how much each normally moves, and what was at stake beforehand. The decision, and the risk, stay yours.

How to spot an unauthorised firm before you fall for one

An unauthorised firm offers to invest your money without being licensed to do so. Almost all the signs below come from the list the CNMV publishes in its "Decálogo para evitar chiringuitos financieros", a ten-point guide to avoiding them.

The signs, in order of reliability

Unsolicited contact. A call, a message, or an ad that finds you. Serious firms advertise too, but they don't chase you individually with a specific opportunity.

Artificial urgency. "This opportunity closes today." No legitimate investment evaporates in a day, and the rush exists so you don't have time to check the register.

Bonuses for investing. Money handed to you on the way in, tied in the fine print to trading a volume far larger than the bonus before you can withdraw anything.

Being asked to recruit others. That isn't investing, it's a pyramid scheme: the first participants get paid with later entrants' money, and it collapses when new ones stop arriving.

Very fast personal closeness. Someone who befriends you over messaging and mentions an opportunity weeks later. The CNMV gives it a separate alert, on romance or affinity scams, which combine emotional deception with investment fraud.

High returns with no risk. This directly contradicts the previous chapter: more expected return demands more risk, always, because nobody overpays for something that is certain.

If you've already fallen for one

Recovering the money isn't always possible, and there's a widespread second scam: firms contacting victims offering to "recover" what was lost in exchange for an upfront payment. Often the same people, or someone who bought the list of victims.

Complaints go to the CNMV and, if there are signs of a crime, to the police. But the correct order is the one in this session: checking the register takes two minutes and happens before transferring anything.

What to remember

• Checking the CNMV register before opening an account takes two minutes, and the CNMV never offers you investments or asks you for personal data over the phone.
• Your shares can be in your name or in the broker's omnibus account; both are legal, and knowing which you have changes what happens on the day something goes wrong.
• FOGAIN covers €100,000 per client and entity only if the firm enters insolvency proceedings or the CNMV declares it cannot return what's yours, never for market losses; and if your broker is a bank, the Deposit Guarantee Fund answers instead.
• A foreign broker leaves you the entire tax job, including the currency conversion.

Related: investment taxation in Spain · order types and how they execute · what "risk" really means