A broker failure does not automatically mean that all client assets are lost. First establish what the firm owes you, which assets can be returned and which legal entity, service and jurisdiction govern the account. Client-asset safeguards and compensation schemes perform different roles; neither a licence nor an account balance alone establishes a guaranteed payout.

Client-asset safeguards and insolvency

For EU investment firms, MiFID II Article 16 requires arrangements safeguarding clients’ ownership rights to financial instruments, particularly on insolvency, and their rights to client funds. It also restricts use for the firm’s own account, with separate provisions for instruments, funds and credit institutions. These obligations support protection of client assets; they do not themselves settle every question about return, shortfalls or insolvency procedure.

Records and safeguarding arrangements help identify assets owed to clients separately from the firm’s own resources. What can be transferred or returned depends on the assets actually available and the applicable procedure. Cash, custodial securities and a CFD claim are different: holding a EUR/USD CFD does not mean owning a parcel of euros that an administrator can simply deliver.

Reliable records and sufficient safeguarded assets help establish each client’s entitlement, but do not guarantee immediate or complete recovery. Administration, reconciliation, shortfalls and applicable insolvency rules can affect the amount and timing. A compensation scheme addresses specified eligible missing assets, not every delay or trading loss.

Before funding an account, verify the legal entity, beneficiary and payment instructions through its independently checked official contact channel. A request to pay an individual or an unexplained account deserves investigation; a payment label alone cannot establish whether safeguarding exists. The regulations section on forexmechanics.com explains how to separate marketing claims from the rules applying to a contract.

How the Polish compensation scheme run by KDPW works

Poland’s KDPW investor compensation scheme addresses specified eligible cash and financial instruments that a participant cannot return to an entitled investor. It does not reimburse ordinary investment losses. Confirm scheme membership, claimant eligibility and the covered event before applying its formula; a Polish-language website or a foreign firm’s notification is insufficient.

For a qualifying KDPW claim, the formula covers 100% of the first EUR 3,000 and 90% of the amount above that, using a maximum calculation base of EUR 22,000. The maximum compensation is EUR 3,000 + 90% × EUR 19,000 = EUR 20,100. A hypothetical eligible missing amount of EUR 10,000 gives EUR 9,300; the formula is not a promise to restore any account below a particular balance.

Investor compensation is separate from deposit protection. Poland’s BFG standard limit is the PLN equivalent of EUR 100,000 for eligible deposits, aggregating a depositor’s accounts at the same institution; specified temporary high balances have separate rules. For investment-firm client accounts, BFG describes underlying-client treatment. Establish the bank, depositor entitlement and nature of the claim rather than treating a bank-owned broker as automatically covered for every investment loss.

Cyprus, the UK and the "foreign broker" trap

Protection follows the contracting entity, scheme membership, service and claimant eligibility, rather than a global brand. A firm serving clients across borders may belong to its home jurisdiction’s scheme. The following are examples of different investor-compensation formulas, not interchangeable guarantees or an assessment of every account offered under these licences.

Poland (KDPW) Compensation scheme for brokerage houses — 100 per cent up to 3,000 euro and 90 per cent of the surplus, with an upper limit of 22,000 euro of covered assets, which gives a maximum payout of 20,100 euro.
Cyprus (CySEC, the ICF fund) Coverage set at the lower of two figures: 90 per cent of the covered client's cumulative claims, or 20,000 euro.
United Kingdom (FCA, the FSCS scheme) Up to GBP 85,000 per eligible person and firm for covered investment claims where the firm failed on or after 1 April 2019.

The Cyprus ICF and UK FSCS examples have different limits and conditions. A larger headline limit does not establish that your product or claim qualifies. For an entity elsewhere, investigate its actual safeguards, scheme and claim procedure. The article on the local versus foreign broker explains entity checks, while MiFID II regulation in forex covers the EU investment-services framework.

Reconcile the amount before assessing eligibility

A simple transaction reconciliation can identify a precise discrepancy to investigate. It does not yet establish a claim covered by a compensation scheme.

Scroll sideways to see the full diagram

Reconcile the amount before assessing eligibilityOpening balance and deposits: 2,000 + 3,000 = 5,000 EUR. Realised result and separate fees: 5,000 − 400 − 50 = 4,550 EUR. Posted withdrawal: 4,550 − 500 = 4,050 EUR. Statement shows 4,000 EUR: discrepancy to investigate, 50 EUR.Opening balance and deposits2,000 + 3,000 = 5,000 EURRealised result and separate fees5,000 − 400 − 50 = 4,550 EURPosted withdrawal4,550 − 500 = 4,050 EURStatement shows 4,000 EURDiscrepancy to investigate: 50 EUR
Fictional data for one period and currency, with no open positions or conversions. The −400 EUR result excludes the separate 50 EUR fee. No cause, insolvency, recognised claim amount or repayment deadline is assumed. KDPW distinguishes eligible missing assets from investment losses.
Reconciling the balance identifies a difference to investigate before assessing a claim.

Attach evidence for each entry and ask about the missing 50 EUR. An omitted transaction, different date range or error could explain it, but the model establishes none of these causes. Your reconciled balance does not automatically become the compensation payable.

What the protection does not cover — and what 2015 taught us

Client-asset safeguards and these compensation schemes do not insure ordinary market losses. They also perform different tasks: returning available assets is separate from compensating eligible missing assets. Reconciliation and formal claim procedures can affect timing, so check the administrator’s or scheme’s official instructions without assuming immediate payment or a universal waiting period.

Consider a hypothetical EUR 50,000 portfolio under the KDPW assumptions. If EUR 40,000 of assets can be returned and EUR 10,000 is an established eligible shortfall, compensation is EUR 9,300 and the combined model recovery is EUR 49,300. If instead the full EUR 50,000 is an eligible missing amount, the formula is capped at EUR 20,100. These are different cases. Do not apply a compensation ceiling to assets that can be returned, multiply it by opening extra accounts with the same participant or assume the remaining claim will be recovered.

On 15 January 2015 the Swiss National Bank discontinued the CHF 1.20-per-euro minimum exchange rate. FSCS records Alpari UK entering special administration on 19 January 2015; its 2015/16 report describes a claims portal and compensation payments to clients. This is evidence of a particular historical process, not a guarantee that every client recovered everything or waited the same time. Current negative balance protection for covered retail CFDs is another arrangement: it limits specified trading liabilities, rather than compensating missing assets after a firm fails.

Verify the entity and its contact details independently before relying on a claimed licence; the article on how to spot a scam broker explains this check. Be alert to fund recovery firms promising to retrieve money from a broker, especially unsolicited demands for advance fees or a guaranteed recovery. FSCS is free to use and says a claims company or solicitor is not needed to make a claim with it. Follow the actual scheme’s document requirements and deadlines.

What to do tomorrow

  1. Find the company name and licence number in your account documents. Open the terms of business and the account registration confirmation and write down the exact name of the entity you have a contract with, together with the country of its licence. This identifies where to check scheme membership, covered services, eligible claimants and claim limits. A licence alone does not guarantee a payout; market losses are not insured.
  2. Verify that entity in the relevant regulator's register. For a Polish brokerage house use the KNF entity search; for a foreign one, the register of the relevant commission. Check that the licence number from the contract matches the entry in the register, not merely the logo on the broker's marketing page.
  3. Establish which compensation scheme you actually fall under. Check scheme membership and whether your actual service and claim qualify — examples include KDPW in Poland, ICF in Cyprus and FSCS in the United Kingdom. Record the applicable limits and exclusions. Outside these jurisdictions, investigate the relevant arrangements rather than assuming either equivalent cover or no cover at all.
  4. Separate returned assets from eligible shortfalls. Record what the firm owes, what can be returned and which remaining claims qualify. Apply the relevant aggregation and limit rules to the covered amount. Keep statements and transaction evidence; a balance above the compensation ceiling does not establish that everything above it is lost.