Regulation & Client ProtectionFSCSFinancial Services Compensation Scheme
FSCS (Financial Services Compensation Scheme)
The UK statutory compensation fund that covers eligible investment claims up to 85,000 GBP if an authorised firm fails.
What FSCS (Financial Services Compensation Scheme) means
The Financial Services Compensation Scheme is the United Kingdom's statutory fund of last resort for customers of authorised financial services firms. It is independent of the FCA but established under the Financial Services and Markets Act, and it is funded by levies on the regulated industry. For investment business, which is the category covering forex and CFD brokers, it can pay eligible claimants up to 85,000 GBP per person per firm. Separate limits apply to deposits, insurance and other categories, and the scheme publishes which failed firms it has declared in default.
Cover engages when an FCA-authorised firm is unable to meet claims against it, typically on insolvency, and when the claimant is eligible, which usually means an individual or small business rather than a large corporate. The FSCS establishes what the client is owed, takes account of any money returned from the segregated client money pool, and pays the balance up to the limit directly. Claims are free to make through the FSCS website, and using a claims management company simply reduces the net amount the client receives.
The FSCS does not compensate for investment or trading losses. Losing money on a leveraged position, being stopped out during a volatile session or being disappointed by execution quality are not compensable events, however unfair they feel. Cover applies only to the FCA-authorised entity: if a UK-based brand onboards a client to an offshore affiliate, that account is outside the scheme entirely. Most professional clients and large businesses are ineligible, and clone firms impersonating authorised businesses are not covered.
Worked example
A UK client of a failed authorised broker had 100,000 GBP on account. The administrator returns 40,000 GBP from the client money pool, and the FSCS pays the remaining 60,000 GBP because it sits within the 85,000 GBP limit.
Related terms
- FCA (Financial Conduct Authority)The UK conduct regulator for financial services firms, including retail forex and CFD brokers.
- Investor Compensation SchemeA statutory fund that pays eligible clients a capped amount when a regulated firm fails and cannot return their money.
- Client Money RulesThe detailed regulatory regime governing how a firm must hold, reconcile and protect money belonging to its clients.
- Segregated AccountsClient money held in bank accounts separate from the broker's own funds, so it is not available to the firm's creditors.
- Financial OmbudsmanA free independent dispute resolution service that decides complaints against regulated firms, with decisions binding on the firm.
Frequently asked questions
What does FSCS (Financial Services Compensation Scheme) mean in forex trading?
The UK statutory compensation fund that covers eligible investment claims up to 85,000 GBP if an authorised firm fails.
How does FSCS (Financial Services Compensation Scheme) work in practice?
Cover engages when an FCA-authorised firm is unable to meet claims against it, typically on insolvency, and when the claimant is eligible, which usually means an individual or small business rather than a large corporate. The FSCS establishes what the client is owed, takes account of any money returned from the segregated client money pool, and pays the balance up to the limit directly. Claims are free to make through the FSCS website, and using a claims management company simply reduces the net amount the client receives.
What is an example of FSCS (Financial Services Compensation Scheme)?
A UK client of a failed authorised broker had 100,000 GBP on account. The administrator returns 40,000 GBP from the client money pool, and the FSCS pays the remaining 60,000 GBP because it sits within the 85,000 GBP limit.
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