FCA Regulation and Client Fund Protection

The FCA is the gold standard of European-facing brokerage regulation. A genuine FCA license means segregated funds, a compensation scheme, and a complaint path that actually works — but only if the license is verified and the entity is the right one.

The Financial Conduct Authority has regulated UK financial firms since 2013. For retail traders, three protections matter most: client money segregation, the FSCS, and retail conduct rules.

Client money rules (CASS)

Under the Client Assets Sourcebook (CASS), FCA-regulated brokers must:

• Hold client money in segregated bank accounts, separate from the firm's own money
• Reconcile client money daily
• Place client assets with approved third parties
• Protect against the broker's own insolvency — your funds are not the broker's assets in bankruptcy

This is the core of "client fund protection." If a broker goes bust, your money is ring-fenced.

The FSCS safety net

The Financial Services Compensation Scheme (FSCS) is the last-resort fund:

• Up to £85,000 per person, per authorised firm for investment claims
• Covers losses when a firm fails or commits civil wrongdoing
• Free to claim for consumers

The FSCS does not cover market losses — only failures of the firm or its obligations.

Retail conduct rules

FCA-regulated CFD and spread betting firms (aligned with ESMA) apply:

Instrument class	Max leverage (retail)
Major forex pairs	30:1
Minor forex, gold	20:1
Major indices	20:1
Commodities (ex gold)	10:1
Individual equities	5:1
Cryptocurrency	2:1

Plus:

• Negative balance protection — retail accounts can't go below zero
• Margin close-out rule at 50% of margin
• No trading bonuses that incentivize overtrading
• A 75% account-loss warning

How to verify

1. Find the firm's FRN (Firm Reference Number) in the website footer
2. Search it on the FCA Register (register.fca.org.uk)
3. Confirm the firm name matches exactly
4. Check permissions include "dealing in investments as agent/principal"
5. Confirm the address matches what the firm publishes

The passport trap

A firm can be EU-passported into the UK under MiFID II, with its home regulator (often CySEC) as the lead. The FSCS then does not cover you — the home country's scheme does, which may be weaker. Always check the home regulator's compensation scheme, not the marketing address.

Practical steps

1. Get the FRN from the broker's footer
2. Verify name, permissions, and address on the FCA Register
3. Confirm CASS client money segregation and FSCS coverage apply to your entity
4. If the firm is passported, check the home regulator's compensation scheme
5. Reject firms whose FRN doesn't verify or whose permissions don't include dealing

Bottom line

FCA regulation is excellent — when the license is real and the entity is the UK one. Five minutes on the FCA Register separates a genuine FCA broker from a passported marketing shell.

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Next: Australia's ASIC and how segregated accounts work down under.