What Happens to Your Money If Your Forex or Gold Broker Goes Bust?

Broker failures are rare but not unheard of. When they happen, what you get back depends almost entirely on two things: whether your money was properly segregated, and which regulator and compensation scheme cover the entity that held it.

What happens at a well-regulated broker

At a firm authorised by a strong regulator such as the FCA:

1. Client money is segregated in accounts separate from the firm's own money and is held on trust for clients.
2. An administrator is appointed to wind the firm down. UK investment firms can enter a special administration regime designed to return client assets quickly.
3. Open positions are closed at prevailing prices.
4. Segregated client money is returned to clients, after the costs of distribution.
5. If there is a shortfall, eligible clients can claim from the compensation scheme, up to its limit (for example up to £85,000 through the FSCS for investment claims).

Returns can still take months.

What happens at an offshore broker

Rules on segregation and audits are lighter, and there is usually no compensation scheme. Clients may become unsecured creditors in an insolvency process in another country, competing with the firm's other creditors. Recovery, if any, can take years.

The 2015 example

When the Swiss National Bank removed the franc's cap against the euro in January 2015, the franc jumped by around 20% to 30% in minutes. Many client accounts went deeply negative. Some brokers failed or needed rescue because clients could not cover their losses. That episode is a large part of why negative balance protection became mandatory for retail clients in the UK and EU; see negative balance protection explained.

Warning signs before a failure

• Withdrawals slow down without explanation.
• The broker pushes harder for deposits or launches unusually generous promotions.
• Regulatory warnings, fines or restrictions are published.
• Audited accounts are late or show losses.
• Key staff leave, or the firm's licence status changes on the register.

How to protect yourself

1. Use the strongest entity available to you and know which one holds your money: which company holds your account.
2. Keep only trading capital on the account and withdraw profits.
3. Spread large balances across firms within compensation limits.
4. Keep your own records of balances, statements and deposits.

Questions traders ask

Is my money safe if the broker is FCA-regulated? It is much better protected: segregation, special administration rules and FSCS cover up to the limit. "Safe" still means within those rules.

Are open trades lost? They are closed at market prices, and the resulting balance is what you are owed.

What about my profits? Realised profits are part of your balance and treated the same as the rest of your client money.