Query regarding Degiro T&C

corum_uk67

So I was browsing through Degiro's library of reference documents and noted the following rather disconcerting entry, so I thought i'd throw it out there for some comments, opinions. Beleggersgiro as I understand it is the third party whose sole function is the safekeeping of financial instruments purchased by Degiro's clients. Degiro then borrow them from Beleggersgiro and lend them out (securities lending), which I'm guessing leads to the following rather worrysome scenario...


quote "4. Distribution of shortage
At the moment that a shortage is found to exist in the amount of money or Financial Instruments held by Beleggersgiro for the account of clients of DEGIRO with third parties, then DEGIRO is entitled to distribute this shortage pro rata to all clients who are entitled to such currency or Financial Instrument in their relation with that Beleggersgiro. This arrangement has as purpose to protect the
clients. At the moment that the shortage is noticed, it is not always immediately clear how and by whose fault the shortage has been caused and whether it is possible to fully cover the shortage.
Without distribution of the shortage to all relevant clients, the clients that would be the first to sell their position would limit their loss to the detriment of the other clients.
An example
Say that 100 clients of DEGIRO invest in shares Fiat. Of these clients, 50 hold each 10 shares and 50 hold each 2 shares. Beleggersgiro holds 600 shares Fiat with KAS Bank for all these clients together. On a certain day, DEGIRO sees that the statement of KAS Bank only refers to 300 shares Fiat. Therefore DEGIRO reduces the holding of each client with 50%, in line with the shortage.
If DEGIRO would not distribute the shortage pro rata to the clients, then the clients that would be the first to sell their position would have no loss at all. Up to 30 clients holding 10 shares each could sell their shares without loss, leaving the other clients with a loss of 100% of their position instead of 50%. Distribution of loss procures that loss is spread in a proportionate and fair manner.
The distribution of the loss of course does not say anything about the cause of the loss and about who is liable. In most cases by far, the loss is caused by a simple administrative failure that is solved after a phone call. When the shortage is caused by an error of a third party, then DEGIRO will clearly do its utmost to procure that the shortage is cured." end quote