Are client funds segregated at Australian CFD brokers?
Verdict
- Yes at Pepperstone, our top pick: its Australian company keeps retail client money in segregated accounts at top-tier banks, apart from its own funds.
- Segregation is not a guarantee: if Pepperstone were liquidated, that money would be dealt with under the Corporations Act 2001, and Pepperstone says there is no guarantee all of it would be returned.
- Pepperstone names no compensation scheme for Australian clients, unlike its UK clients' FSCS cover of up to £85,000.
- For other ASIC brokers, our verified data has no segregation statement, so read the client-money section of each PDS.
Segregation means the broker holds your deposits in bank accounts set aside for clients, rather than mixing them with the money it uses to run the business. It is one of the most important safeguards in a CFD account, and one of the most misunderstood.
What Pepperstone says about client money
Pepperstone Group Limited, which holds AFSL 414530, states on its Australian 'How we protect you' page that retail client funds are segregated and held with top-tier banks. It is equally direct about the limits: on liquidation, segregated money would be handled under the Corporations Act 2001 (Cth), and there is no guarantee that all funds would be returned. That candour, together with negative balance protection and capped retail leverage, is part of why it is our first choice in Australia.
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What segregation does and doesn't protect
| Scenario | Does segregation help? |
|---|---|
| The broker uses client money to pay its own bills | Yes: segregated funds are not meant to be used that way |
| The broker becomes insolvent | Partly: segregated money is kept apart from company assets, but full return is not guaranteed |
| Your trades lose money | No: losses come out of your balance as normal |
| A shortfall in the client pool | No compensation scheme is named for Pepperstone's Australian clients |
How Australia compares with other Pepperstone regions
Every Pepperstone entity segregates client money, but what sits behind it differs. UK clients can claim from the FSCS up to £85,000; clients of Pepperstone GmbH in Germany are covered by the EdW at 90% up to €20,000; EU clients of the Cyprus company by the ICF up to €20,000. Australian clients have segregation and negative balance protection, but no named fund. Consider a A$40,000 balance at a failed broker where the client pool comes up 10% short: without a scheme, the client may recover A$36,000, depending on how the pool is distributed.
Questions to put to any broker
Capital.com (AFSL 513393), IC Markets (AFSL 335692) and other ASIC brokers publish client-money terms in their PDS; our fact files don't hold their segregation wording, so read it there.
- Which banks hold segregated client money, and in which country?
- Is professional or wholesale client money treated the same way as retail money?
- What does the PDS say happens to client money if the company is wound up?
- Is there any compensation scheme, and who is eligible?
Reduce your exposure regardless of broker
- Keep only the trading capital you need in the account.
- Withdraw profits regularly back to your bank.
- Spread larger sums across two licensed brokers if you trade size.
- Stay a retail client unless the extra leverage is essential, since retail clients keep the full set of protections.
Sources
Pepperstone's protection pages by region.
Does Pepperstone segregate client funds in Australia?
Yes. It says retail client money is held in segregated accounts at top-tier banks.
Am I covered by a compensation scheme if an Australian CFD broker fails?
Pepperstone names none for its Australian clients. Its UK, German and Cyprus companies do have schemes.
Is segregated money the same as a guarantee?
No. It keeps client money apart from the broker's, but Pepperstone says there is no guarantee all funds would be returned in a liquidation.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. This page is general information, not investment advice; read the broker's PDS and TMD before you trade.