ASIC Regulation and Segregated Accounts

ASIC offers solid conduct rules and leverage caps — but the Australian regime has a crucial difference from the UK's: there is no government compensation scheme, and client money rules for OTC derivatives are looser than you might expect.

The Australian Securities and Investments Commission licenses brokers under the Australian Financial Services Licence (AFSL). For retail CFD and forex traders, that brings both protection and one notable gap.

ASIC's CFD product intervention

Since March 2021, ASIC has imposed leverage caps on CFDs issued to retail clients:

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

Plus mandatory negative balance protection and a margin close-out rule at 50% of margin. These mirror ESMA's design.

Segregated accounts — with a catch

ASIC requires licensees to hold client money in segregated trust accounts. But for OTC derivatives (which includes retail forex and CFDs), the Corporations Act historically permits brokers to use client money to hedge their own exposure. This means your deposited funds may be at risk if the broker's hedging counterparty fails.

This is the single biggest difference from the FCA's CASS regime. UK brokers cannot touch client money this way; Australian OTC brokers, in some cases, can.

No compensation scheme

Australia has no government-backed compensation fund comparable to the FSCS or SIPC. If an ASIC-licensed broker collapses:

• Segregated client money should be recoverable (subject to the hedging caveat above)
• There is no guarantee fund to top up shortfalls
• Recovery depends on segregation, trust law, and bankruptcy priority

ASIC runs Professional Registers where you can confirm an AFSL, but it does not insure you against broker failure.

Dispute resolution: AFCA

ASIC licensees must be members of the Australian Financial Complaints Authority (AFCA):

• Free, independent dispute resolution for consumers
• Binding on the firm if you accept the decision
• A real alternative to litigation for smaller claims

AFCA is the equivalent of the UK's Financial Ombudsman — a genuine recourse path.

How to verify

1. Get the broker's AFSL number (footer)
2. Search it on ASIC Connect Professional Register (connectonline.asic.gov.au)
3. Confirm the licence authorisations include "deal in a financial product" and "make a market"
4. Confirm AFCA membership
5. Read any enforceable undertakings or banning orders against the firm

Practical steps

1. Verify the AFSL on the ASIC Professional Register
2. Confirm the broker's AFCA membership
3. Understand that client money rules for OTC derivatives are looser than the UK's — size your deposit accordingly
4. There is no compensation scheme: do not keep more on deposit than you need to
5. Prefer brokers that voluntarily keep client money fully segregated beyond the legal minimum

Bottom line

ASIC regulation is credible on conduct and leverage but leaves one gap the FCA fills: no compensation scheme, and looser client money rules for OTC derivatives. Verify the licence, then size your exposure to the gap.