What happens to your money if a broker goes bust? Segregated funds and compensation schemes
The Farol Markets team · 29 October 2026 · 5 min read · How we write
In short
- Client money should be held separately from the firm's own money.
- Compensation schemes have limits; confirm them at the source.
- Keep at the broker only what your plan needs.
Most traders worry about losing money on a trade. Fewer ask what happens to the balance itself if the firm holding it fails. The answer depends on two things you can check before depositing: whether client money is kept separate from the firm's own money, and whether a compensation scheme covers you.
Segregated accounts: your money is not the firm's money
Under the rules of most serious regulators, a broker must hold client money in segregated accounts, separate from the money it uses to run the business. If the firm goes bust, that money is meant to be returned to clients rather than used to pay the firm's creditors. In practice, returning it can take months, and shortfalls are possible when records are poor or rules were broken.
Compensation schemes: the second net
If segregated money is missing, some jurisdictions have an investor compensation scheme that pays eligible clients up to a limit.
| Where the firm is authorised | What exists | What to check |
|---|---|---|
| EU countries, Portugal included | National investor compensation schemes; the EU minimum is €20,000 per eligible investor | Which scheme covers that specific firm and whether retail CFD clients are eligible |
| United Kingdom | The FSCS for eligible investment claims | The current limit on the FSCS website |
| Offshore jurisdictions | Often no compensation scheme at all | Ask the firm in writing; assume none if the answer is vague |
| Brazil | The FGC covers deposits at banks, not trading accounts held abroad | Don't assume Brazilian protections follow your money to a foreign firm |
Limits change, so always confirm them on the scheme's official website rather than in the broker's marketing.
A 4-point check before depositing
- Find the firm's legal entity and its regulator (start with CVM alerts explained).
- Look for "client money" or "segregation" in the client agreement.
- Identify the compensation scheme and its current limit.
- Keep only the money you need for your plan with the broker; leave the rest in your bank.
Size the account, not just the trade
Point 4 is risk management too. If your plan risks 1% per trade, the account doesn't have to hold your whole savings. Work out the size each trade needs with the lot size calculator and the margin implications with the pip value calculator. Then read Negative balance protection: what it covers, the other protection that matters when markets move violently.
In short
Segregated accounts and compensation schemes protect your balance from the firm's failure, not from trading losses. Check both before depositing, confirm the limits at the source and keep at the broker only what your plan needs.
Questions people also ask
What are segregated accounts?
Accounts where a firm holds client money apart from its own, so it is meant to go back to clients if the firm fails.
Does the FGC cover a trading account abroad?
No. The FGC covers certain deposits at Brazilian financial institutions, not accounts held with foreign trading firms.
Do these schemes cover trading losses?
No. They protect against the firm's failure, not against losses you make in the market.
Take the quiz and find your trader profile.
Take the quizTrading financial markets carries a high level of risk and can result in the loss of all the money you invest. Farol Markets content is for education only and is not investment advice. Past results do not guarantee future results.