Definition
A segregated account is a separate bank account that a financial institution maintains specifically for client funds, keeping them completely isolated from the company's own operational money. When you deposit funds with a regulated broker, those assets go into a designated account that the broker cannot use for its business expenses, trading activities, or debt payments.
Segregated accounts keep your funds separate from a broker's operational money, preventing the company from using your deposits for its own business purposes.
This legal barrier guarantees your money never appears on the broker's balance sheet and remains protected if the company faces financial difficulties or bankruptcy. Think of it like a safety deposit box at a bank—the bank holds it for you, but cannot access or use what's inside for its own purposes.
Regulatory bodies like the UK's Financial Conduct Authority and the US Securities and Exchange Commission require brokers to maintain these segregated accounts to protect traders from potential misappropriation of funds. Understanding forex trading regulations and compliance requirements helps traders verify that their chosen broker adheres to proper fund segregation standards.
In short: Segregated accounts keep your trading funds in a separate bank account, legally protected from your broker's business operations and creditors.
Example in Action
Understanding how segregated funds work becomes clearer when examining real-world broker failures.
FTX used client money to invest through Alameda Research, leaving customers unable to withdraw funds.
MF Global took client money from segregated accounts to cover its own debts, earning a $100 million fine from regulators.
Both cases showed why separation matters for African traders choosing brokers.
When facing difficulties accessing their funds, traders should contact their broker immediately and escalate to regulatory authorities if the issue persists.
Why It Matters
Real-world broker collapses reveal patterns, but the question remains: why should African traders care about segregated funds?
Segregation shields deposits from broker debts during insolvency. Creditors can't touch separated money. Regulators like South Africa's FSCA enforce audits to prevent fraud. The FSCA licenses forex brokers and monitors their compliance with financial safeguards to maintain market integrity. Nigerian traders who've lost funds to unregulated platforms understand the stakes. Transparent segregation builds trust, stabilizes markets, and guarantees withdrawals succeed even when brokers fail financially.
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