If your broker goes bankrupt, your securities are returned to you or transferred to another provider — segregation rules keep client assets out of the bankruptcy estate. What is actually at risk is your uninvested cash, up to the applicable compensation-scheme limit. Those statutory limits are €20,000 through EU investor compensation schemes under Directive 97/9/EC, £85,000 through the UK’s FSCS, and $500,000 (including $250,000 cash) through America’s SIPC. The critical detail most investors miss: these limits attach to the contracting entity named in your client agreement — not to the brand on the app icon.
🛡️ Core Rule: Verify two things before depositing: the exact legal entity in your client agreement, and which compensation scheme covers that entity. Everything else is marketing.
What Happens to Your Shares if a Broker Fails?
When a brokerage enters insolvency, client assets follow a different path than the company’s own balance sheet:
- Segregated securities are ring-fenced. Shares and ETFs held in custody (typically omnibus accounts at third-party custodian banks) legally belong to clients, not to the failed firm. They are returned or transferred; they are not sold to pay the broker’s creditors.
- An administrator transfers accounts. In European retail broker failures of recent years, operating business was typically moved to another provider within weeks or months while positions remained intact.
- Shortfalls trigger the compensation scheme. Only if client assets or money cannot be fully reconciled does the statutory fund step in, up to its limit.
- Uninvested cash is the weak point. Cash balances are protected up to the scheme limit; amounts above it rank as unsecured claims against the estate.
This is why regulator registers list both the group and the specific licensed entity — the same brand can operate four entities with four different protection regimes.
How Much Money Is Actually Protected in 2026?
| Scheme | Jurisdiction | Limit | What It Covers |
|---|---|---|---|
| ICS / ICSD schemes | EU member states | €20,000 per investor | Securities shortfalls and claims from broker failure |
| FSCS | United Kingdom | £85,000 per person | Investments and cash held by FCA-authorised firms |
| SIPC | United States | $500,000 incl. $250,000 cash | Custodied securities and cash at SIPC members |
| DGS | EU bank deposits | €100,000 | Bank accounts only — not brokers or P2P platforms |
Three facts about the EU figure worth knowing:
- The €20,000 minimum under Directive 97/9/EC is unchanged in 2026. The European Commission’s 2010 proposal to raise it to €50,000 was withdrawn in March 2015.
- The IMF’s 2025 euro-area assessment recommended reviewing whether the €20,000 minimum is still adequate — a signal to watch, not a change you can rely on yet.
- Ireland’s Investor Compensation Company (ICCL) introduced a new levy structure effective 1 August 2026 following its 2026–2029 funding consultation — scheme funding mechanics are actively evolving even where limits are not.
Which Scheme Protects You? Follow the Contracting Entity
The scheme is determined by where your contracting entity is licensed — examples among widely used platforms:
| Contracting entity | Regulator | Scheme |
|---|---|---|
| flatexDEGIRO Bank (DEGIRO) | BaFin (Germany) | German investor compensation, €20,000 |
| IBKR Ireland | Central Bank of Ireland | Irish ICS, €20,000 |
| Trading 212 UK Ltd | FCA | FSCS, £85,000 |
| XTB Cyprus | CySEC | Cypriot ICF, €20,000 |
Two practical consequences:
- Same brand, different protection. A platform serving the UK through an FCA entity gives £85,000 coverage; the same app used via its EU entity gives €20,000. Check which entity onboards residents of your country before funding the account.
- Entity routing changes. From March 2026, XTB formally routes clients by entity — XTB UK for UK residents, XTB Cyprus for EU residents, XTB International for a restricted country list — so re-verify your agreement after any relocation.
What Is NOT Protected by Any Scheme?
Compensation schemes cover operational failure, not investment outcomes:
- ❌ Market losses. If your portfolio falls 30%, no scheme pays anything — that is investment risk.
- ❌ P2P and crowdlending claims. Peer-to-peer investments are private credit claims with no DGS, ICS or FSCS cover whatsoever.
- ❌ Offshore-entity losses. Accounts contracted with entities licensed in zero-compensation jurisdictions have no statutory backstop.
- ⚠️ Amounts above the limit. Cash beyond the scheme cap is recoverable only proportionately from the insolvency estate — spreading large cash balances across providers is the standard mitigation.
What Should You Do Immediately After a Broker Failure?
- Do not panic-sell elsewhere. Your positions remain yours; duplicating exposure in a new account doubles risk instead of reducing it.
- Download statements and tax reports while systems are still accessible — reconciliation is faster with your own records.
- Wait for the appointed administrator’s instructions rather than following social-media transfer advice.
- File with the compensation scheme only after the shortfall is confirmed — premature claims slow down processing for everyone.
- Check the regulator’s public register for updates; authorities publish case status during wind-downs.
Frequently Asked Questions
Can I lose my money in a brokerage account?
Your invested securities are extremely unlikely to be lost outright thanks to segregation rules. The realistic loss scenarios are cash above the €20,000/£85,000/$500,000 scheme limits when a firm fails, or trading with an unregulated entity that was never covered at all.
What happens to my ETFs if my broker goes bust?
Nothing immediate. The ETF units are registered in segregated custody outside the bankruptcy estate, and an administrator transfers them to a successor provider. You keep the positions and their cost basis; only a reconciliation shortfall would draw on the compensation scheme.
Is it safe to keep more than €20,000 in a brokerage account?
Securities themselves are covered by segregation regardless of value — the €20,000 ICS limit primarily matters for cash and unreconciled claims. Investors holding large portfolios typically accept scheme limits on cash but insist on tier-1 regulation and custody segregation as the primary safeguards.
Does the €100,000 deposit guarantee apply to brokers?
No. The €100,000 Deposit Guarantee Scheme Directive protects bank deposits only. Brokerage accounts fall under the separate investor compensation regime with its €20,000 EU minimum — confusing the two is one of the most common safety misconceptions among new investors.
Is my money safe with an offshore-regulated broker?
Offshore licensing (e.g. St. Vincent and the Grenadines, Marshall Islands) generally means no segregation enforcement and no compensation scheme. If the entity fails, there is no statutory recovery path. National regulators actively flag such firms — Portugal’s CMVM added new unauthorised-entity warnings as recently as August 2026 — so checking both the licence register and your regulator’s warning list takes minutes and removes most scam risk before any money moves.