I would like to understand what protection provides the law against frauds like Ponzi fraud scheme when investing in ETFs and index funds.

Quick note: When I say 'fraud' I mean actual fraudulent practices, not losses caused by the market fluctuations.

It seems that there are some 'investment products' that are not protected by the law, for instance see Afinsa:

[Wikipedia] Afinsa was not a financial institution. Contrary to equity investment, tangible investments are not protected by a mandatory warranty fund under Spanish law (available only to registered financial institutions, which allowed the victims of the earlier Banesto and Gescartera scandals to recover a small part of their assets). Such investment is overseen by the Consumption departments of the regional governments instead of the Comisión Nacional del Mercado de Valores.

My understanding is that anything considered an actual 'financial institution' is under a regulation that protects from frauds. Is this correct?

How can I know if a ETF/Index fund provider (e.g.: Vanguard) is considered a 'financial institution'?

Is there any precedent of a goberment actually protecting or indemnifying investors victims of fraud?

  • 1
    What country's laws/regulations are you interested in? These things vary. – Chris W. Rea Dec 4 '19 at 23:17
  • If I need to say some, I would say Spain and UK, but It isn't that I'm interested in a particular country's set of laws, but how to check if a ETF provider (like Vanguard for instance) is considered a financial institution and some general guidelines to find out the relevant regulations (specifically agains frauds) in any (developed world) country. – Martel Dec 5 '19 at 12:23

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