A broker failure does not automatically mean your investments disappear. The practical questions are whether your cash and assets were properly held, whether the records identify your entitlement, and what it will cost to return them.
For UK investors, client money protection, asset custody and compensation serve different purposes. Segregation separates client property from the broker’s own resources. Custody arrangements establish how investments are held. Compensation may cover an eligible loss if something cannot be returned. None should be treated as a promise of immediate access or protection against falling investment prices.
How client money protection works
Client money is cash a firm holds for clients under the applicable rules. In an investment account, this can include money awaiting investment, sale proceeds and income awaiting payment. It is different from money belonging to the broker, such as fees it has already earned.
The FCA’s Client Assets Sourcebook, usually shortened to CASS, sets requirements for segregation, records and reconciliations. Client bank accounts must be identified separately from accounts holding the firm’s own money. The FCA client money rules also require controls to establish what each client is owed.
Segregated does not necessarily mean a separate bank account in your name. Your cash may sit in a pooled account alongside other clients’ money, with the broker’s records identifying your share.
Check whether an interest paying balance is actually invested in a qualifying money market fund. Under CASS, firms must obtain explicit consent for that arrangement and explain that the money will not be held under the client money requirements. The fund units instead fall under applicable custody rules.
When reviewing an account, ask a plain question: “Is this balance client money at a bank, a deposit in my name, or an investment?” Do not accept “your cash is safe” as a substitute for an answer.
How asset custody and nominee accounts work
Custody concerns investments such as shares, bonds and fund units rather than uninvested cash. In a conventional nominee arrangement, a nominee company holds legal title while you remain the beneficial owner. The nominee’s name appears on the relevant register; the custody records connect the holding to you.
The FCA rules on holding client assets require firms to protect clients’ ownership rights, particularly during insolvency, and address how legal title is registered or recorded. Properly held client investments should not simply become property available to pay the broker’s general creditors.
An omnibus custody account combines holdings for several clients. This is not automatically a warning sign, but accurate records matter. A statement showing 200 shares must correspond to an actual entitlement within the custody arrangements, not just a number displayed by the app.
Ask for statements showing quantities, security identifiers and cash balances. A portfolio valuation alone is less useful: £20,000 could represent different holdings on different days. Keep enough detail to identify what you own, not just what it was worth.
The broker may not be the final custodian
A broker can appoint another institution to hold investments, and that custodian may use further providers. Overseas holdings can introduce different legal rules and market practices.
The FCA requirements for third party custody require care in selecting, appointing and reviewing custodians. They also require client assets to be identifiable separately from assets belonging to the broker and the third party.
Ask which legal entity provides custody and where the assets are held. If you are considering a second broker, compare the underlying arrangements rather than stopping at the brand names. Two accounts are less useful for spreading operational risk if both depend on the same provider.
For any securities lending or borrowing facility, request a separate explanation of what changes: who may use your holdings, what collateral is provided, what happens after a default and how you can withdraw consent. Treat these as additional arrangements to assess, not as small print to skip.
What happens when a broker fails?
The first task is establishing what exists and who is entitled to it. Insolvency practitioners examine the firm’s records, reconcile them against bank and custody records, and determine client entitlements. Returning assets may involve a transfer to another provider rather than a cash payment.
A shortfall means the available client property does not meet the recorded entitlements. Depending on the pool and type of asset, clients may share that shortfall proportionately. The FCA guidance for insolvency practitioners addresses reconciliations, shortfalls, distribution costs and transfers.
That creates an important distinction: a record of ownership supports your claim, but it does not prove that every asset is present. Missing holdings, disputed transactions or incomplete records must be investigated before a reliable distribution can be made.
Access and ownership are separate questions
Trading and withdrawals can be restricted while the position is assessed. An investor may therefore retain an entitlement to assets without being able to sell or withdraw them immediately.
When Logic Investments entered special administration on 16 January 2026, the FCA’s client notice on Logic Investments described restrictions on using affected money and assets. It also stated that distribution costs, including administrators’ fees, would be deducted from client property, with possible FSCS coverage for eligible clients.
This illustrates why “segregated” should not be read as “available tomorrow, without deductions”. The firm’s financial failure and the work needed to return client property are separate problems.
Build that possibility into your own planning. If you expect to need money for a house purchase or regular living costs, ask whether you could manage if the investment account became inaccessible. An emergency reserve should not depend on successfully selling investments through the very account causing the emergency.
Returning assets is not the same as paying compensation
The Financial Services Compensation Scheme is a backstop for eligible claims, not a replacement for custody. Its investment compensation rules provide up to £85,000 per eligible person, per firm for applicable failures from 1 April 2019. Protection depends on the firm, regulated activity and claim. It does not cover ordinary poor investment performance.
The £85,000 figure is not a ceiling on the value of correctly held investments that can be returned.
Consider a hypothetical account containing £160,000 of shares. If all the shares are present, correctly attributed and transferable, their value exceeding £85,000 does not itself create a compensation claim. The task is returning those holdings, subject to the administration arrangements and any applicable costs. If assets are missing, compensation eligibility becomes a separate question.
Do not assume separate accounts with the same firm each provide another investment compensation allowance. Identify the legal entity and read the proposed treatment of any shortfall and distribution charges. Our guide to what FSCS protection covers and excludes examines the compensation questions in more detail.
What if the bank holding client cash fails?
A bank failure is different from a broker failure. The standard UK deposit protection limit increased to £120,000 per eligible depositor, per PRA authorised institution on 1 December 2025. The PRA confirmation of the deposit protection increase concerns deposits, not an increase in the £85,000 investment compensation limit.
For eligible money held through a client account, deposit protection can apply to the underlying beneficiaries. However, your share may need to be combined with money you hold directly at the same authorised institution.
Consider a simplified example: you have £95,000 in personal savings at one bank, and £35,000 of your broker cash is held for you at that same institution. Assuming both balances qualify and no additional protection applies, the combined exposure is £130,000. The standard £120,000 limit leaves £10,000 above it. The FSCS guidance on client accounts and deposit aggregation addresses this overlap.
Ask the broker which banks it uses and whether it can identify your allocation. Record the answer alongside your direct savings accounts. Different account labels do not make this comparison unnecessary.
Keep the two failure scenarios separate when asking about protection: “What happens if you fail?” and “What happens if the bank holding my client money fails?” A useful response should address both.
Checks to make before funding an account
Start with the contracting entity, not the trading name. Match the legal name in the agreement to the regulatory entry, then examine permissions, restrictions and the stated handling of client money. Follow the steps for checking a financial firm on the FCA Register rather than relying on a regulatory badge in an advertisement.
Next, read the custody and client money terms with these questions in mind.
| Area to check | Question to ask | What to retain |
|---|---|---|
| Cash arrangements | Is cash held as client money, a bank deposit or fund units? | The written explanation and relevant account terms. |
| Custody provider | Which entity holds the investments, and in which jurisdiction? | The custodian’s legal name and custody disclosure. |
| Ownership records | How are my holdings identified within pooled accounts? | Statements showing quantities and security identifiers. |
| Additional rights | Can assets be lent, pledged or used under another arrangement? | Any consent, collateral terms and withdrawal procedure. |
| Failure procedures | How would I establish my entitlement and receive updates? | Account identifiers and verified contact details. |
If the answer is vague, ask for the relevant clause rather than another reassurance. Keep a dated copy of the agreement you accepted, along with later amendments. Save statements outside the broker’s app so that your evidence does not depend on continued access to it.
Consider whether a second provider would improve your ability to manage a disruption. Weigh that against extra charges, more paperwork and the need to monitor another account. The purpose is a workable contingency plan, not collecting trading apps.
What to do if access stops or failure is announced
A delayed withdrawal alone does not establish what has happened. Request a written explanation, check for an official notice and avoid making decisions from social media rumours.
- Verify the situation. Establish whether this is a service outage, an account restriction or a formal insolvency. Find the appointed administrator’s details through independently checked official communications.
- Preserve your records. Download available statements, contract notes, cash movements and correspondence. Note unsettled trades and any difference between your records and the latest account statement.
- Check the proposed entitlement. Compare quantities and balances carefully before accepting a claim statement. Raise discrepancies in writing and retain the response.
- Follow the case instructions. Track claim deadlines, identity checks, transfer proposals and any FSCS process. Ask how hardship circumstances should be reported if essential spending is affected.
Take formal deadlines seriously: special administration procedures can include cut off dates for claims. Do not assume the administrator will reconstruct your position without your involvement.
Independently verify any request for a payment, password or remote access to your device. If you suspect deception rather than an ordinary business failure, follow the separate steps for responding to an investment scam.
The most useful preparation is straightforward: know the entity you contracted with, know how your property is held, and keep evidence of what belongs to you. That will not remove every risk, but it gives you a practical starting point if the broker stops operating.