When you make a deposit with a broker, where are your funds held?
You might ask yourself the question ‘where are my forex funds held after I make my initial deposit?’ If you trade through a regulated forex broker, your funds will be held in a segregated account.
Why is a segregated account important?
A segregated account is separate from the broker's main bank account(s).
A broker uses its main bank account to run its core business. This is paying its day-to-day expenses like wages, rent and running costs.
Under regulated rules, the company is not allowed to use a client's investment funds as working capital. This results in my forex funds being pooled in a segregated account with other clients.
This also results in the client funds being easier to identify should the broker fall into financial difficulties. With an increase in forex scams over the last decade, a segregated account is considered critical in deciding which broker to trade through.
Figure 1 forex trader
Is Pepperstone a regulated broker?
Pepperstone takes their professional standards and the safety of their client’s funds extremely seriously. The company includes regulated entities in various jurisdictions around the world including the Financial Conduct Authority in the UK (FCA), the Australian Securities and Investments Commission (ASIC) in Australia, the Capital Markets Authority in Kenya, the Dubai Financial Services Authority in Dubai and various others.
Pepperstone places clients’ funds across various major banks. These banks are regularly assessed to ensure further safety.
Should the unlikely event of Pepperstone liquidation occur, funds up to an amount of £85,000, may be compensated for under the Financial Services Compensation Scheme (FSCS). The FSCS acts as a ‘safety net’ for clients of FCA regulated firms, such as Pepperstone.
Other regulators have different compensation schemes in the event of financial difficulties.
If you’d like to learn more about Pepperstone, please visit our website.