The sequence
- The broker stops paying withdrawals, often with excuses about banking problems.
- The regulator suspends the licence and appoints an administrator or liquidator.
- Open positions are closed at whatever price the administrator can get.
- Segregated client money is identified and, if it is all there, returned; if some is missing, it is shared pro rata.
- A compensation scheme, where one exists, pays shortfalls up to its limit.
- Unsegregated money joins the queue of creditors, usually months or years later, for pennies.
What decides your outcome
| Protection | Effect |
|---|---|
| Segregation | Your balance is outside the broker's estate |
| Compensation scheme | Shortfalls covered up to 85,000 pounds (FCA) or 20,000 euros (EU) |
| Regulatory capital | Makes failure less likely and less deep |
| Private insurance | Better than nothing; a policy the broker controls |
| None of the above | You are an unsecured creditor |
Historical cases
Alpari UK failed in January 2015 after the Swiss franc move; clients were repaid from segregated funds and the FSCS. MF Global's 2011 failure exposed misuse of segregated money and clients waited years. Numerous offshore brokers have simply closed their websites, with no administrator and no recovery.
Reducing the risk
- Keep money at brokers regulated by the FCA, ASIC, CySEC or another tier-one authority.
- Keep only what you need for margin in the account; withdraw profits.
- Spread a large balance across more than one broker.
- Watch for withdrawal delays, which precede every failure.
Regulators and their protections
Trading forex, CFDs and other leveraged products carries a high risk of losing money. This guide is general education, not advice.