Compensation
Schemes Explained
What happens to your money if a broker fails? Compensation schemes protect your funds up to £85,000 (UK) or €20,000 (EU). Know your protection level.
What is a Compensation Scheme?
Your financial safety net
A compensation scheme is a fund that protects investors if a regulated financial firm fails. Think of it like deposit insurance for banks, but for brokers.
When a broker becomes insolvent (goes bankrupt), the compensation scheme steps in to return client funds - up to a maximum limit. This protection only applies to properly regulated brokers who are members of the scheme.
How It Works
- Broker fails: Company enters administration/insolvency
- Scheme activates: Compensation body takes over claims
- Claims submitted: Clients file for their balances
- Verification: Claims checked against broker records
- Payout: Compensation paid up to the limit
What's Covered
- ✓ Account balance at time of failure
- ✓ Open positions (valued at failure date)
- ✓ Pending withdrawals not yet processed
- ✗ Trading losses (normal market losses)
- ✗ Amounts above the scheme limit
Timeline: Broker Failure to Payout
Broker Declared Insolvent
Regulator announces failure. Trading suspended.
Administrator Appointed
Insolvency practitioners take control of assets.
Scheme Activated
Compensation body starts processing claims.
Claims Submitted
Clients submit claims with account evidence.
Compensation Paid
Valid claims paid up to scheme limits.
Compensation Schemes by Country
Detailed breakdown of protection levels worldwide
FSCS
Financial Services Compensation SchemeThe gold standard. Covers investments if FCA-authorized firm fails. Claims can be made online at fscs.org.uk
Visit FSCS →esisuisse
Swiss Deposit InsuranceSwiss precision. Covers deposits with FINMA-regulated institutions. One of the highest in the world.
Visit esisuisse →FGDR
Fonds de Garantie des DépôtsHigher than standard EU level. €70K for investments, €100K for cash deposits.
EdW
Entschädigungseinrichtung der WertpapierhandelsunternehmenStandard EU level. Covers 90% of the claim up to €20,000 maximum.
ICF
Investor Compensation FundImportant for EU traders. Many forex brokers are CySEC regulated. ICF covers if they fail.
Visit ICF →ASIC Client Money Rules
No formal compensation schemeNo FSCS-style scheme, but strict client money segregation rules. If broker fails, segregated funds should be returned in full.
Offshore Jurisdictions
Vanuatu, Seychelles, Belize, etc.⚠️ WARNING: No compensation schemes exist. If broker fails, you lose everything above what's in segregated accounts (if any).
Compensation Comparison Table
Side-by-side comparison of all schemes
| Country | Scheme | Regulator | Max Protection | Tier |
|---|---|---|---|---|
| 🇬🇧 United Kingdom | FSCS | FCA | £85,000 | 1 |
| 🇨🇭 Switzerland | esisuisse | FINMA | CHF 100,000 | 1 |
| 🇫🇷 France | FGDR | AMF | €70,000 | 2 |
| 🇩🇪 Germany | EdW | BaFin | €20,000 | 2 |
| 🇨🇾 Cyprus | ICF | CySEC | €20,000 | 2 |
| 🇮🇪 Ireland | ICCL | CBI | €20,000 | 2 |
| 🇪🇸 Spain | FOGAIN | CNMV | €100,000 | 2 |
| 🇦🇺 Australia | N/A (Segregation) | ASIC | Full (if segregated) | 1 |
| 🇸🇬 Singapore | N/A | MAS | Strict requirements | 1 |
| 🏝️ Offshore | None | Various | $0 | 3 |
How to Make a Compensation Claim
Step-by-step process if your broker fails
Confirm the Broker has Failed
Wait for official announcement from the regulator. Not all trading suspensions mean insolvency.
Gather Your Documentation
Account statements, deposit receipts, correspondence, and identity documents. The more evidence, the smoother the claim.
Register Your Claim
Contact the relevant compensation scheme. Most accept online claims. FSCS: fscs.org.uk, ICF: via CySEC.
Wait for Verification
The scheme will verify your claim against broker records. This can take weeks to months.
Receive Compensation
Valid claims are paid up to the scheme limit. Amounts above the limit may be recovered later from broker assets, but this isn't guaranteed.
Frequently Asked Questions
Does the compensation scheme cover trading losses?
No. Schemes only cover losses due to broker failure (insolvency). Normal trading losses, bad trades, or market movements are not covered.
What if my balance exceeds the compensation limit?
You'll receive the maximum (e.g., £85,000) and become an unsecured creditor for the remainder. You may recover more later, but it's not guaranteed.
How long does compensation take?
FSCS aims for 7 days for simple claims, but complex cases can take 3-12 months. ICF and other schemes vary.
Am I covered if I use an offshore entity of a regulated broker?
No. You're only covered by the regulator of the specific entity you're trading with. If you're with "Broker X (Seychelles)," you have no FSCS protection even if Broker X has an FCA license for its UK entity.
What if my broker is regulated but not a member of the scheme?
Most regulators require scheme membership for authorization. But always verify. Check the scheme's member list directly.
Do I need to do anything before a broker fails?
Keep records: account statements, deposit confirmations, correspondence. If something goes wrong, you'll have the evidence you need.
Choose Brokers with Maximum Protection
Find FCA-regulated brokers with £85,000 FSCS coverage