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Segregated Client Accounts: Where Your Money Actually Sits

What separating client money from company funds means, which banks hold it, and why segregation is not the same thing as insurance.

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BrokerObserver Research9 years in investing education, live accounts at every broker we rank · Updated 2026-09-07

When you fund a trading account the money does not become the broker's property. A regulated broker must hold it separately from its own, in a client account at a Tier 1 bank.

Why it exists

The point is simple: salaries, marketing, operating costs and company losses must not be funded from client money. If the firm ceases to exist, client funds are legally not its assets and cannot be used to settle its debts.

What segregation gives you

  • Client money is excluded from the insolvency estate.
  • The broker cannot use it to cover its own losses.
  • An external auditor reconciles balances regularly.

What it does not give you

Segregation does not protect against trading losses and it is not instant. If a broker becomes insolvent an administrator is appointed and returning funds takes anywhere from several months to a couple of years. If the accounts show a shortfall, the compensation scheme covers the difference — FSCS up to £85,000 in the UK, ICF up to €20,000 in Cyprus. Offshore licences usually have no scheme.

How to check a specific broker

  1. Find the client money section of the client agreement.
  2. See whether the legal entity and its regulator are named.
  3. Verify the licence number in the regulator's register.
  4. Note whether a specific partner bank is disclosed — that adds transparency.

Frequently asked questions

What is a segregated account?

A separate bank account where the broker holds client money without mixing it with its own operating funds. It is mandatory under tier-one and tier-two regulation.

Does segregation protect me if the broker fails?

Partly. Client money sits outside the insolvency estate and must be returned, but the process takes months, and any shortfall is covered by the compensation scheme — where one exists.

How do I verify segregation?

A regulated broker must disclose it in the client agreement and often names the partner bank. An FCA, CySEC or ASIC licence makes segregation a legal requirement.

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