Segregated Accounts
Explained
The #1 safety feature to protect your trading capital. Understand how fund segregation works and what happens if your broker fails.
What Are Segregated Accounts?
The foundation of client fund protection
How Segregation Works
When you deposit funds with a regulated broker, your money goes into a segregated client account - a bank account completely separate from the broker's own operational funds.
This means:
- ✓ Your money is held in a separate bank account (often at major banks like Barclays, NAB, etc.)
- ✓ The broker cannot use your funds for their business expenses
- ✓ Your funds are ring-fenced from the broker's creditors
- ✓ If the broker fails, your funds are not part of their estate
Segregated vs Non-Segregated
The critical difference for your protection
Tier 1/2 Regulated Brokers
- ✓ Funds held in separate bank account
- ✓ Protected from broker's creditors
- ✓ Regular audits verify compliance
- ✓ Compensation scheme if broker fails
- ✓ Daily/weekly reconciliation required
- ✓ Cannot be used for broker operations
Offshore / Unregulated Brokers
- ✗ Funds mixed with broker operations
- ✗ No protection from creditors
- ✗ No independent audits
- ✗ No compensation scheme
- ✗ No reconciliation requirements
- ✗ Broker can use funds freely
What Happens If Your Broker Fails?
Understanding the protection process
Broker Declares Insolvency
The broker announces they cannot meet financial obligations. Trading is suspended.
Administrator Appointed
An independent administrator takes control. Your segregated funds are identified and protected.
Client Claims Process
You file a claim for your funds. The administrator verifies your account balance.
Funds Returned
Your segregated funds are returned. This typically takes 3-12 months.
Compensation Scheme (If Shortfall)
If any funds are missing, compensation schemes cover up to £85,000 (UK FSCS) or €20,000 (EU ICF).
📋 Real Example: Alpari UK (2015)
When Alpari UK failed after the Swiss Franc shock:
- ✓ Client funds were fully segregated
- ✓ Administrator identified all client balances
- ✓ 100% of segregated funds returned to clients
- ✓ Process completed within 12 months
- ✓ FSCS covered additional losses up to £50,000 (limit at the time)
💰 Compensation Schemes by Regulator
Your safety net if all else fails
| Regulator | Country | Scheme | Max Compensation | Coverage |
|---|---|---|---|---|
| FCA | 🇬🇧 UK | FSCS | £85,000 | Per person, per firm |
| CySEC | 🇨🇾 Cyprus/EU | ICF | €20,000 | Per person, per firm |
| BaFin | 🇩🇪 Germany | EdW | €20,000 | 90% of claim up to max |
| ASIC | 🇦🇺 Australia | None specific | Segregation only | Full segregation required |
| NFA/CFTC | 🇺🇸 USA | SIPC (limited) | $500,000 | Securities only, not forex |
| SVG, Vanuatu | 🏝️ Offshore | None | $0 | No protection |
How to Verify Segregation
Check before you deposit
Check Terms & Conditions
Look for "segregated accounts" or "client money" in their legal documents.
Ask Where Funds Are Held
Reputable brokers disclose their banking partners (Barclays, NAB, etc.).
Verify Regulation
Tier 1/2 regulators (FCA, ASIC, CySEC) require segregation by law.
Check Audited Statements
Public brokers publish annual reports confirming segregation compliance.
🛡️ All Our Brokers Use Segregated Accounts
Every broker in our database is verified to use proper fund segregation. Your money is protected. No offshore brokers. No exceptions.
Frequently Asked Questions
Is segregation required by law?
Yes, for Tier 1 and Tier 2 regulated brokers. FCA (UK), ASIC (Australia), CySEC (EU), and similar regulators legally require client fund segregation. Offshore regulators have no such requirements.
Can a broker still steal segregated funds?
It's extremely difficult with proper regulation. Brokers face regular audits and must reconcile client funds daily/weekly. Any discrepancy triggers immediate regulatory action. This is why choosing Tier 1/2 regulated brokers is essential.
Does segregation protect against trading losses?
No. Segregation protects against broker failure, not market losses. If you lose money trading, that's a trading loss. Segregation ensures your remaining funds are safe even if the broker goes bankrupt.
What about negative balance protection?
That's a separate protection. NBP means you can't lose more than your deposit. Many Tier 1/2 regulators require NBP for retail clients. Segregation + NBP together provide comprehensive protection.