What regulation actually protects
Segregated funds, compensation schemes, and what a licence does not cover.
Segregation keeps your money separate
A regulated broker must hold client money in accounts separate from its own, so that if the firm fails, client funds are not part of what its creditors can claim. This is the single most important protection a licence provides, and it is why the regulator of the entity you sign with matters more than the reputation of the brand.
Compensation schemes have limits, and geography
Some regulators back segregation with a statutory compensation scheme: the FSCS covers eligible UK clients up to £85,000, and the Cypriot ICF up to €20,000. Australia has no equivalent scheme for retail derivative clients, which surprises people who assume ASIC regulation implies one.
These schemes cover the firm failing. They do not cover losing money on a trade, and no scheme anywhere does.
- FSCS: up to £85,000 for eligible UK clients
- ICF: up to €20,000 for eligible Cyprus clients
- ASIC: segregation required, no statutory compensation scheme
- Offshore registrations: usually neither
Negative balance protection
In the UK, EU and Australia, a retail client cannot lose more than the money in their account - if a gap in the market takes a position beyond it, the broker absorbs the difference. It is a genuine protection and it is why leverage limits and negative balance protection tend to arrive together.
Outside those jurisdictions it is a commercial promise rather than a legal requirement, and a handful of brokers state explicitly that losses can exceed your deposit. That sentence is worth finding before you deposit, not after.
What a licence does not do
It does not vouch for the broker's pricing, its platform, or its customer service. It does not mean the regulator has assessed whether the product suits you. And it does not follow the brand across borders: the same logo operating under a different entity carries different obligations entirely.