"Segregated client funds" is one of the most-repeated phrases on broker websites, and one of the least explained. It sounds like a guarantee. It's actually an operational rule — and like every rule, it only means something if it's enforced by a real regulator. Here's what segregation is, what it does and doesn't protect against, and how to check whether it applies to your account.
What segregation actually means
Segregation is a simple accounting separation: a broker must hold client money in bank accounts that are legally distinct from its own operating funds. The broker's rent, salaries, marketing budget and trading losses are paid from one pool. Your deposit sits in another.
In principle this means that if the broker's business fails — it can't pay staff, a lawsuit wipes it out, the office closes — the money in the segregated pool isn't part of what creditors can claim. It's meant to come back to clients rather than being absorbed into the firm's general liabilities.
That's the whole mechanism. It's a ring-fence around a specific pool of cash, enforced by rules a regulator writes and audits.
Why "the broker says so" isn't enough
Segregation is only as strong as the regime that checks it. A regulator with real audit teeth — the FCA's CASS (Client Assets Sourcebook) regime in the UK is the clearest example — requires regular reconciliations, external audits of client-money accounts, and reporting obligations if a shortfall appears. Breach those rules and a firm faces real enforcement action, not a warning email.
An offshore-only entity can print "segregated client funds" on the same footer with none of that behind it. There's no external auditor checking the claim, no regulator empowered to fine the firm for getting it wrong, and no way for you to verify it beyond taking the broker's word. The phrase is identical; the protection is not. Our tier-1 vs offshore regulation guide covers this gap between licence types in more detail.
This is also why segregation isn't universal even among licensed platforms. Crypto exchanges regulated only as virtual-asset providers, for instance, commonly hold client crypto and cash together with operating funds rather than in a segregated structure — a materially different arrangement from a CASS-regulated forex broker, even though both might use words like "secure" in their marketing.
What segregation does not cover
This is the part most people get wrong, and it's worth stating plainly:
- It does not protect you from losing money by trading. A margin call, a bad fill, a stopped-out position — that's market risk, and segregation has nothing to do with it. See how leverage actually works for how those losses happen.
- It is not the same as a compensation scheme. Segregation is about where your money sits while the firm operates. A compensation scheme like the UK's FSCS is a separate backstop that pays out if the firm fails and the segregation itself broke down — money went missing despite the rule. Our compensation schemes explained article covers the difference in full.
- It does not follow the brand. It follows the legal entity that holds your account. A broker can run a UK entity where segregation is CASS-audited and, under the same logo, an offshore entity where it is a private policy with no external check. See the broker brand is not the company that holds your money for how that split works in practice.
A worked example
Two clients open accounts with the same international brand. One is onboarded under the group's FCA-authorised UK entity; the client agreement states that retail client money is held in segregated accounts under FCA CASS rules, subject to independent audit. The other client, resident in a country the FCA entity doesn't serve, is onboarded under the group's offshore entity instead; the client agreement makes a similar segregation claim, but there's no external regulator auditing it, and no published enforcement history to check it against.
Both accounts might display an identical "funds are segregated" line in the app. Only one of those claims is checked by anyone other than the broker itself.
How to check segregation on your own account
- Find the exact legal entity named in your client agreement — not the brand you searched for. Our entity check tool helps identify which entity typically serves your country.
- Look up that entity on the regulator's official register and confirm it's actively authorised. Our how to verify a broker's licence guide walks through the steps.
- Check whether that regulator runs an audited client-money regime (like CASS) or simply permits firms to describe their own internal policy as "segregation."
- Don't stop at the word — confirm the regulator behind it on the regulation guide, and remember that a compensation scheme, where one exists, is a separate layer on top.
Segregation reduces one specific risk — your deposit being swallowed by the firm's own losses — it does not remove market risk, and it is only as real as the regulator checking it. This is educational content, not financial advice; confirm your own entity's client-money arrangements on the regulator's official register before funding an account.