In plain English
What Client money segregation means
The purpose is to distinguish customer money from the firm’s assets and support its return if the firm fails. Rules vary: they may define which balances qualify, where money may be held, how frequently records must be reconciled, and when funds may be transferred to third parties. Segregation is a safeguarding mechanism, not a guarantee that every customer will be repaid promptly or in full.
Why it matters
For traders, the key question is not simply whether a broker advertises “segregated accounts.” Check which legal entity holds the account, which regulator’s client-money rules apply, and whether the protection covers the relevant product and client classification. Bank failure, a shortfall, administration costs, legal priorities, or an inapplicable regime can still affect recovery.
Example
A broker receives $10,000 that qualifies as client money. Under its applicable rules, it places the funds in a designated client bank account rather than its office-expense account and reconciles its internal client balances against bank records. If records show $10,000 due to clients but only $9,900 held, the $100 shortfall must be identified and addressed under the governing rules.
Quick answers
Common questions
Does client money segregation guarantee a full refund if a broker fails?+
No. It is intended to improve protection by separating client funds from firm money, but recovery can depend on the applicable legal framework, the accuracy of records, available funds, third-party failures, costs, and the insolvency process.
Does segregation cover profits and losses on open CFD or forex positions?+
Not automatically. The treatment of margin, unrealized profit or loss, collateral, and money transferred to counterparties depends on the product terms and the client-money rules applying to the specific broker entity.
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