Segregated client funds are money a broker or investment firm holds for you in accounts kept apart from its own money. The aim is that, if the firm gets into trouble, your cash is not treated as part of its assets. Segregation lowers the risk of loss but does not remove it. How far it helps depends on the country, the legal entity you sign up with and the compensation scheme behind it. This guide covers the rules, the limits and the checks you can make before depositing.
Trading forex and CFDs carries a high risk of losing money, and gambling is for adults aged 18 and over. Nothing here is investment advice, and nothing here suggests that either activity is a source of reliable income.
TL;DR
- Segregation means client money sits in separate accounts from the firm’s own money, so the firm cannot use it for its own business.
- It is a safeguard, not insurance. Shortfalls can still occur, and recovery rules differ by jurisdiction.
- Authorisation in one country does not carry over to another. Check which legal entity holds your account and which regulator supervises it.
- In the UK, a separate compensation scheme may apply to a failed investment firm, with limits.
- Online casinos work differently: UK-licensed operators must tell you how well your balance is protected.
Table of Contents
- What segregated client funds actually are
- What segregation protects you from
- What segregation does not protect you from
- Segregation versus compensation schemes
- Why the country and legal entity matter
- How to check a broker’s client fund protection
- Online casinos: how customer balances are protected
- Our perspective
- Where to go next
- FAQ
- Sources
What segregated client funds actually are
A broker holds your deposit so you can trade. Without any rules, that deposit could be mixed with the firm’s operating cash, used to pay its bills or lent out. Segregation rules prevent this by requiring client money to go into designated accounts.
In the UK, the FCA’s client money rules (CASS 7) require a firm that receives client money to promptly place it into accounts with permitted institutions, such as a central bank, an authorised credit institution, an authorised third-country bank or a qualifying money market fund. The FCA describes segregation as an important safeguard for protecting client money.
US rules use the same idea under different names. FINRA explains that customer cash protection includes segregating customer cash from the firm’s own business activities. For futures, the CFTC says customer funds must be kept apart from the futures commission merchant’s own funds, and that the accounts must be titled for the benefit of customers and include acknowledgements that preclude set-off against the firm’s debts.
The detail varies, but the principle is consistent: your money should be identifiable as yours, held somewhere the firm’s creditors cannot reach it.
Segregated, omnibus and pooled accounts
Segregated does not always mean one account per client. Many firms hold all client money in a pooled client account and keep records showing what each client is owed. The Central Bank of Ireland says that where client assets sit in an omnibus account, accounting segregation must be maintained, and that assets held through a nominee carry the same safeguarding obligations for the firm.
The practical point is that the firm’s records matter as much as the bank account. Good record-keeping lets an insolvency practitioner work out who is owed what.
What segregation protects you from
Segregation mainly protects against two situations:
- Misuse by the firm. The firm cannot treat your deposit as working capital.
- Claims by the firm’s creditors. If the money is properly held for clients, creditors of the firm should have no claim to it. The Central Bank of Ireland notes that where a firm gives a pledge or charge over money in a client asset account, the money would still be client funds because title has not absolutely transferred.
In US futures, the NFA states that customer funds are not subject to creditor claims against a futures commission merchant if it becomes insolvent, and may be transferred to another firm if necessary.
What segregation does not protect you from
This is the part most summaries skip.
- Trading losses. Segregation does nothing about losses from your own positions. Leverage can magnify them, and with CFDs you can lose your whole deposit quickly.
- Shortfalls. The NFA cautions that even though firms must segregate customer funds, customers may not recover everything if there is not enough available to cover customer obligations, and that customer accounts are not insured. The CFTC says any shortfall in a failed futures commission merchant participates pro rata in distributions to unsecured creditors.
- Delays. IOSCO’s survey of regimes notes that, if an investment firm becomes insolvent, some systems may not be able to promptly transfer or distribute client money and securities. Money can be frozen for a long time while the administration runs.
- Market value falls. SIPC in the US is explicit that it does not protect against declines in the value of securities.
So segregation is best read as one layer of defence, alongside regulation, capital requirements and compensation schemes.
Segregation versus compensation schemes
Segregation and compensation are different tools. Segregation keeps your money out of the firm’s estate. Compensation schemes step in when the money is not there.
In the UK, the Financial Services Compensation Scheme says that for investment firms that failed after 1 April 2019, it may compensate valid claims up to £85,000 per eligible person, per firm. Whether a particular claim is eligible depends on the firm, the activity and the circumstances, so check the scheme’s own pages for your situation.
In the US, SIPC protects customers of failed member brokerage firms with a limit of $500,000 in total, including $250,000 for cash. SIPC covers the custody function, meaning restoring cash and securities, and not losses from falling prices. Futures accounts at US firms are handled differently, as the NFA statement above shows.
| Feature | Segregated client money | Compensation scheme |
|---|---|---|
| What it does | Keeps client money apart from the firm’s own | Pays eligible claims when a firm fails |
| Who sets the rules | Financial regulator (for example the FCA’s CASS rules) | Scheme rules, often set in law |
| Does it cover trading losses? | No | No |
| Is there a cap? | No cap, but recovery depends on what is in the accounts | Yes, a per-person limit |
| Applies across borders? | No, depends on the firm’s regulator | No, depends on country and entity |
Why the country and legal entity matter
The same brand can operate through several companies in different countries. Your protection depends on the one that holds your contract, not the logo on the website.
IOSCO reports that client-asset protections depend on each jurisdiction’s insolvency law and the laws that define property rights. The Financial Stability Board makes the same point, stating that national regimes vary significantly in how client assets are protected, and that effective resolution regimes should allow rapid return or transfer of segregated assets.
Two practical consequences follow:
- A broker authorised in one country is not automatically authorised or protected in another, including elsewhere in Europe. Never assume authorisation travels.
- Some brokers move non-UK clients to an offshore entity with different rules. Read the terms to see which company you are contracting with.
A worked example
Imagine two clients of one broker brand. One is onboarded by a UK-authorised entity, so FCA client money rules apply to that firm and the FSCS may be relevant to a valid claim. The other is onboarded by an overseas affiliate under a different regulator, with its own segregation rules and perhaps no compensation scheme. Same website, same platform, very different position if the firm fails. This is why we read the client agreement before anything else.
How to check a broker’s client fund protection
There is no single switch that proves safety. A sensible check takes about twenty minutes:
- Find the legal entity. Look in the terms and conditions or the footer for the company name, registered address and registration number. Make sure it is the entity you will contract with.
- Check the regulator’s register. In the UK, use the FCA’s Financial Services Register to confirm the firm’s status and permissions. Abroad, use the relevant regulator’s own register. Match the name, address and reference number to the website.
- Read the client money wording. The client agreement or a client money policy should say whether money is held in segregated accounts, with which type of institution and under which rules.
- Look for compensation scheme details. Terms should say whether a scheme applies, and for which entity. If the wording is vague, treat that as unresolved.
- Note what is not covered. Leverage, spreads, overnight financing, inactivity fees and withdrawal fees all affect what you get back. Read them as part of your safety check.
- Check withdrawal terms. Look for processing times, minimum amounts and verification steps. Funds you cannot withdraw promptly are not much use as protection.
Our forex broker reviews checklist follows the same order, and you can set shortlisted firms side by side on our broker comparison page.
Online casinos: how customer balances are protected
Casino balances are a different matter. A casino is not a broker, and the rules are set by gambling regulators.
In Great Britain, the Gambling Commission requires operators to tell customers whether their funds are protected if the operator becomes insolvent. Its example wording shows the spread: where funds are held separately from company money but rated “not protected”, they are not protected in an insolvency, while at the “high protection” level funds are held in an independent trust account. So “separate” alone does not tell you how safe your balance is.
The Isle of Man Gambling Supervision Commission explains that licensees must arrange to safeguard player funds if they cease to operate, using methods such as bank guarantees, trusts and client accounts. It adds that money in a client account is held on trust until it is withdrawn or lost in gambling, and cannot be used to pay other creditors.
When reading a casino’s terms, look for the protection level statement and the licence details. Our casino reviews note licence status for each operator we cover. Remember that a bonus is conditional, with wagering requirements and expiry dates, and that gambling should never be treated as a way to make money or recover losses. If it stops being fun, GamCare and BeGambleAware offer free support in the UK.
Our perspective
Segregated funds are one of the first things we look for, but never the only one. A firm can segregate money perfectly well and still have poor withdrawal handling, wide spreads or unclear terms.
We would rather a reader understand the legal entity, the regulator and the compensation position than rely on the word “segregated” in a marketing line. That is why our reviews separate verified facts from company claims, and why we say plainly when something could not be confirmed.
Our rankings are editorial. Affiliate commissions and sponsored placements do not decide them, and sponsored listings are labelled. You can read how we are funded on our affiliate disclosure page.
Evan Alexander
Where to go next
If you are comparing brokers or casinos, start with the entity and regulator, then the protection wording, then costs. Our broker reviews and casino reviews are built around that order, and our homepage at EuroGain Online lists the latest guides. Some operators pay for featured placements, which we label separately from editorial reviews.
Leverage can magnify losses as well as gains, so only deal with money you can afford to lose, and read each operator’s risk warnings before depositing.
FAQ
What is meant by segregated funds?
Segregated funds are client monies held in accounts separate from the firm’s own money. The firm cannot use them for its own business, and its creditors should have no claim over them. The exact rules depend on the regulator, so read the firm’s client money policy.
Are segregated client funds the same as insured funds?
No. Segregation keeps money apart, while insurance or compensation pays out when something goes wrong. The NFA notes that US futures customer accounts are not insured, and UK compensation, where available, is capped at a set limit per person, per firm.
Can I lose money even if my broker segregates funds?
Yes. Segregation does not cover trading losses, fees or falls in market value. It also does not guarantee full recovery if a firm fails and the accounts are short, as regulators in the US and elsewhere have made clear.
How do I know which rules apply to my account?
Identify the legal entity named in your client agreement, then check its regulator’s register. Rules and compensation differ by country and by entity, so authorisation in one place does not apply elsewhere.
Sources
- FCA Handbook, CASS 7.13 Segregation of client money
- FINRA, Segregation of Assets and Customer Protection
- CFTC, Futures Commission Merchants
- Central Bank of Ireland, Chapter 1 Segregation
- NFA, Investor FAQs
- IOSCO, Survey of Regimes for the Protection, Distribution and Transfer of Client Assets
- FSB, Protection of Client Assets in Resolution
- SIPC, What SIPC Protects
- FSCS, What we cover
- Gambling Commission, example customer funds statements
- Isle of Man GSC, Player Protection Principles
Recommended
- Exness Stop Out Protection: Limits in Volatile Markets
- Axi Select Program: Funding, Rules and Risks Explained
- Axi Professional Account: Eligibility and Risks
- Forex Margin: Leverage, Close-Outs and Risks
Editorial Disclaimer: This article is provided for general informational and educational purposes only and does not constitute financial, investment, legal, or gambling advice. Where relevant, gambling is intended only for adults aged 18 or over, or the higher legal age in their jurisdiction, and involves a risk of financial loss. Forex and CFD trading involve a high risk of loss, particularly when leverage is used. Regulations, product availability, fees, and promotional terms may vary by juris
