Key lessons
- Client money segregation is the most important protection.
- Extreme market events can create losses beyond account balances — hence negative balance protection.
- Special administration rules now speed up the return of client money in the UK.
Refco (2005)
US-based Refco, which had a large forex business, collapsed in 2005 after hidden debts were revealed shortly after its stock market listing. Clients of its unregulated FX operations faced lengthy bankruptcy proceedings — an early lesson in why regulation of the specific entity matters.
MF Global (2011)
MF Global collapsed in October 2011, and its UK arm entered special administration. Client money shortfalls and the complexity of untangling accounts delayed returns to clients. The UK subsequently strengthened client money rules, and the Investment Bank Special Administration Regulations 2011 created a regime designed to return client assets faster.
The Swiss franc shock (2015)
On 15 January 2015 the Swiss National Bank unexpectedly removed its cap on the franc. EUR/CHF collapsed within minutes and liquidity vanished. Stop-losses filled far from their levels, and some clients ended up with negative balances. Alpari (UK) entered insolvency days later, and other firms needed emergency funding — FXCM, for example, received a large rescue loan.
The episode was a major reason regulators later made negative balance protection mandatory for retail CFD clients.
What protects UK clients today
| Protection | What it does |
|---|---|
| Client money rules (CASS) | Your money held in segregated accounts, separate from the firm's own funds |
| Special administration | A regime to return client money and assets more quickly |
| FSCS | Up to £85,000 for eligible claims if there's a shortfall |
| Negative balance protection | Retail clients can't owe more than their account balance |
| Capital requirements | Firms must hold capital to absorb losses |
Read more in segregated client money explained.
Frequently asked questions
What happens to my money if an FCA broker goes bust?
Segregated client money is returned through the insolvency process. If there's a shortfall, eligible clients can claim from the FSCS up to £85,000.
What was the Swiss franc shock?
On 15 January 2015 the Swiss National Bank removed its cap on the franc against the euro. EUR/CHF fell sharply within minutes, and some brokers and clients suffered losses far beyond their margin.
CFDs and spread bets are complex instruments and come with a high risk of losing money rapidly due to leverage. Most retail investor accounts lose money when trading these products. You should consider whether you understand how they work and whether you can afford to take the high risk of losing your money.