Client money protection addresses what happens to money a broker holds for you if the business fails. It does not protect a forex position from an adverse exchange rate move, and it does not promise immediate access to your balance during an insolvency.
For a UK retail forex account, assess three separate questions: which legal entity holds your account, how it treats your money, and what compensation might apply if money is missing. A statement that funds are “segregated” is useful, but it is not the whole answer.
How segregated client money works
Segregation separates client money from the broker’s own funds. Under the applicable FCA client money rules, firms must maintain arrangements for holding, recording and reconciling that money. The statutory trust framework preserves clients’ beneficial interests rather than treating their money as ordinary working capital available to fund the broker’s business. These duties sit within the FCA’s CASS 7 client money rules.
Segregation does not necessarily mean a separate bank account bearing your name. A broker can hold money for several clients in a pooled client account, with its records identifying each person’s entitlement. The accuracy of those records matters as much as the account label.
Nor does segregation prevent every possible loss. Missing funds, deficient records and the costs of returning money can complicate a failure. Think of segregation as a legal and operational safeguard, not a promise that an administrator can press “withdraw all” on the first morning.
Check the company behind the trading account
Start with the legal name in your client agreement, not the logo on the trading platform. Save the agreement, account opening confirmation and any notice that changes the company providing your account.
Compare those documents with the firm’s regulatory entry. Look for consistency between the legal name, firm reference number, contact details and services offered. Our guide to checking FCA authorisation and the correct legal entity covers that verification process.
Ask the broker to confirm in writing whether it treats your funds as client money under CASS, which entity owes you money, and where its client money arrangements are described. “We are regulated” does not answer all three questions.
Keep the reply with your account records. If the agreement names one company but the payment instructions name another, request an explanation before transferring money. There may be a legitimate payment arrangement, but a mismatch deserves an answer rather than an assumption.
What happens when a forex broker fails?
An investment firm holding client money may enter special administration, an insolvency procedure with an objective of returning client money and assets as soon as reasonably practicable. This is not theoretical for forex customers: Alpari (UK) entered special administration on 19 January 2015. The FCA’s notice to Alpari customers describes the procedure and the administrators’ assessment of its client money position.
Do not treat that objective as a repayment deadline. Establishing what the firm holds and what each client is entitled to receive comes before a reliable distribution calculation.
For your own planning, separate three milestones: confirmation that your claim has been recorded, agreement on its value, and actual payment or transfer. An acknowledgement email addresses the first, not necessarily the other two.
Ask administrators what information they need, whether your balance is disputed and when they expect to issue their next update. Those questions are more useful than repeatedly asking for a payment date that has not yet been established.
Your screen balance is not necessarily the final claim
Failure can trigger the pooling and distribution process under CASS 7A.2 on primary pooling events. The rules address client entitlements, including the treatment of margined transactions and relevant close-out values. A final entitlement is therefore not necessarily identical to the last balance visible in an app.
For a forex account, distinguish cash balance, account equity and available margin. They measure different things. An account showing £12,000 cash alongside a £2,000 open trading loss should not be approached as an unquestioned £12,000 repayment claim.
That example is only an illustration, not a claim valuation. The actual calculation depends on the transactions, applicable rules and close-out treatment.
Preserve statements showing open positions, financing charges, deposits, withdrawals and transaction identifiers. If you dispute a calculation, identify the transaction and amount involved. A clear reconciliation gives the administrator something to investigate; a screenshot of a headline balance may leave several questions unanswered.
Why a client money shortfall can arise
A shortfall exists where the money available for return does not cover the relevant client entitlements. It is separate from a trading loss already reflected in the account.
Distribution costs can also reduce what is available. Costs properly associated with returning client money or assets may fall on clients, and FSCS protection may meet eligible losses, including eligible distribution costs, within its limit. The FCA’s explanation of the Logic Investments administration sets out those issues.
When reviewing an administrator’s statement, separate the agreed entitlement, any shortage in the money held, and the costs allocated to your claim. Do not combine them into a single unexplained “haircut”. You need to know what each deduction represents before deciding whether to challenge it.
Also distinguish an interim payment from a final settlement. Ask whether further recoveries remain possible, whether money has been reserved for unresolved claims, and how later payments will be communicated. Build your household budget around money actually received, not an optimistic recovery estimate.
What FSCS protection covers for a failed broker
The Financial Services Compensation Scheme’s investment protection limit is £85,000 per eligible person, per firm for firms failing after 1 April 2019. It is not a separate allowance for every trading account, currency balance or platform login. Eligibility depends on the firm, activity, claim and claimant; authorisation alone does not establish that every loss qualifies. The FSCS investment protection requirements explain those conditions.
FSCS does not compensate ordinary poor investment performance. Losing money because a currency trade moved against you is different from a failed firm being unable to return money it legally owes.
The £85,000 figure is a compensation ceiling, not a ceiling on the client money that can be returned through an administration. Do not assume everything above it is automatically lost, or that every balance below it will be paid without an eligibility assessment.
A worked example: balance versus compensatable loss
Assume a hypothetical client has an agreed entitlement of £150,000 after trading adjustments. The following scenarios illustrate why the size of the account and the size of the remaining loss must be considered separately.
| Illustrative scenario | Client money returned | Loss before compensation |
|---|---|---|
| Full return, with no deduction | £150,000 | £0 |
| Partial return | £100,000 | £50,000 |
| Larger shortfall | £50,000 | £100,000 |
Assuming full eligibility, no other claims using the allowance and no additional costs, the £50,000 loss would sit within the £85,000 limit. The £100,000 loss would exceed it by £15,000.
These are arithmetic examples, not forecasts of an administration. They also do not prescribe payment order: compensation and distributions may be coordinated rather than arriving as two neat, sequential payments. Ask how any compensation affects your rights to later recoveries so you do not count the same money twice.
What if the bank holding client money fails?
A broker failure and a client bank failure are different events. Where eligible money is held on your behalf at a failed UK authorised bank, deposit protection may apply to you as the beneficial owner, subject to the arrangement and eligibility requirements.
The standard deposit protection limit is £120,000 per eligible person, per authorised bank or banking group sharing a licence. Relevant personal deposits and money held beneficially through client accounts can count together. The FSCS deposit protection questions and answers explains that aggregation.
Do not substitute the £120,000 deposit limit for the £85,000 investment limit when assessing a broker’s failure. They address different claims.
As a practical check, ask which banks the broker uses and whether it can explain your exposure to them. For example, if £80,000 of personal savings and £50,000 of eligible client money were attributable to you at the same authorised bank, the combined £130,000 would exceed the standard deposit limit by £10,000. That illustration assumes both balances fall within the same protection calculation.
Negative balance protection does a different job
UK retail CFD protections, including those applying to rolling spot forex, include negative balance protection. This restricts liability for covered trading losses to funds in the relevant trading account. It does not insure a positive account balance against broker insolvency. The FCA’s guidance on CFD consumer protections also warns about losing protections through inappropriate professional classification or redirection to overseas providers.
Keep the questions separate: negative balance protection concerns how much you can owe from covered trading; segregation concerns how client money is held; compensation concerns eligible losses when a firm cannot meet its obligations.
If offered professional status or a transfer overseas, request a written comparison of the protections before accepting. Do not treat a higher borrowing capacity or a different margin rate as sufficient reason to change the legal basis of your account.
What to do if your broker stops operating
Use a documented process rather than reacting to messages demanding immediate action. Begin by identifying an official failure notice and independently confirming the appointed administrator’s contact details.
- Preserve your records. Download statements, agreements, trade confirmations and payment evidence if access remains available. Keep copies outside the platform.
- Follow the published claims process. Record deadlines, submit requested identification securely and retain confirmation of submission.
- Reconcile the proposed entitlement. Compare deposits, withdrawals, charges and closed positions with your own records. Submit discrepancies with supporting documents.
- Check compensation instructions. Establish whether an individual application is required or whether the administrator is coordinating an assessment.
- Verify unexpected requests. Independently check any demand for a release fee, tax payment, remote computer access or transfer to a new account.
Keep a simple correspondence log with dates, claim references and copies of documents sent. If several family members hold accounts, maintain separate files rather than combining their evidence.
A delayed withdrawal by itself does not establish insolvency. For payment problems where no failure has been announced, use the separate guide to forex broker deposits, withdrawals and currency conversion to review the payment process and raise a clear query.
Reduce dependence on one trading account
Before funding an account, decide how much money genuinely needs to sit there. Keep household emergency reserves separate from speculative trading funds, and avoid leaving surplus cash with a broker simply because moving it requires another form.
Balance that approach against your margin needs. Removing cash without checking open positions can create a different problem. Base withdrawals on a trading risk budget, not just a compensation threshold.
If considering more than one provider, compare the legal entities rather than counting brand names or apps. Assess administration workload and access risk alongside financial protection. Our guide to comparing UK forex brokers places these checks alongside pricing, execution and service.
The useful question is not simply whether a broker advertises protected funds. Ask what money must be returned, who is responsible for returning it, what could reduce that amount, and how you would manage without access while the position is resolved.