Investor Protection Schemes
How compensation schemes like FSCS, ICF, and SIPC protect your trading funds if a regulated broker fails.
What Are Investor Protection Schemes?
Investor protection schemes (also called compensation funds) are government-backed or industry-funded programs that reimburse clients when a regulated financial firm fails and cannot return client money. These schemes are a critical safety net for forex traders.
If your broker goes bankrupt, loses client funds, or commits fraud, the compensation scheme steps in to refund your deposits up to a specified limit. This is why trading with regulated brokers is essential.
Major Compensation Schemes Worldwide
🇬🇧 FSCS (UK) - Financial Services Compensation Scheme
Coverage Limit
£85,000 per person, per firm
Regulator
FCA (Financial Conduct Authority)
Claim Timeline
Typically 3 months or less
Eligibility
UK residents & EEA nationals (with restrictions)
FSCS is one of the world's most generous protection schemes. It covers deposits, investments, insurance policies, and mortgage advice if an FCA-authorized firm fails.
🇨🇾 ICF (Cyprus) - Investor Compensation Fund
Coverage Limit
€20,000 per client (or 90% of claim)
Regulator
CySEC (Cyprus SEC)
Claim Timeline
3-9 months typically
Eligibility
Retail clients of CySEC firms
ICF covers clients of CySEC-regulated brokers. Many popular forex brokers are CySEC-licensed due to EU passporting benefits, making ICF widely relevant.
🇦🇺 ASIC (Australia) - No Direct Scheme
Australia doesn't have a direct compensation scheme like FSCS or ICF. However, ASIC requires brokers to either:
- • Hold Professional Indemnity (PI) insurance covering client losses
- • Maintain higher capital reserves (AUD $1M minimum)
ASIC's strict capital requirements and segregation rules mean broker failures are rare, reducing the need for a compensation fund.
🇩🇪 EdB (Germany) - Entschädigungseinrichtung
Coverage Limit
€100,000 (increased from €20,000)
Regulator
BaFin (Germany)
Germany's compensation scheme offers higher coverage than most EU countries. BaFin-regulated brokers are Tier 1 with strong oversight.
How Compensation Schemes Work
Typical Claim Process
- 1. Broker Failure Declaration
The regulator declares the broker insolvent or unable to meet client obligations.
- 2. Claim Notification
Eligible clients are notified and given instructions on how to file a claim with the compensation scheme.
- 3. Verification
The scheme verifies your account balance, transaction history, and eligibility based on submitted documentation.
- 4. Compensation Payment
If approved, you receive compensation up to the scheme's limit (e.g., £85,000 for FSCS, €20,000 for ICF).
What's Covered vs. Not Covered
✅ Typically Covered
Cash deposits held with the broker
Funds in segregated client accounts
Unrealized profits on open positions (some schemes)
Account balances up to the coverage limit
❌ Not Covered
Trading losses (losses from market movements)
Funds above the coverage limit (e.g., £85K+ for FSCS)
Professional/institutional client accounts (usually)
Accounts with offshore/unregulated entities
Comparison Table
| Country | Scheme | Limit | Claim Time |
|---|---|---|---|
| 🇬🇧 UK | FSCS | £85,000 | ~3 months |
| 🇨🇾 Cyprus | ICF | €20,000 | 3-9 months |
| 🇩🇪 Germany | EdB | €100,000 | ~6 months |
| 🇦🇺 Australia | None (PI insurance) | Varies | N/A |
| 🇺🇸 USA | None (but strict capital rules) | N/A | N/A |
Trade with Protected Brokers
Find regulated brokers offering FSCS, ICF, or other investor protection schemes.
View Protected Brokers