What Happens to Your Investments If Your Broker Goes Bust?

The short answer

If a regulated broker fails, your shares and funds should not disappear with it. In most major markets the law treats the investments a broker holds for you as yours, not the broker’s, so they are kept apart from the company’s own money and handed back or moved to another broker when it collapses. Compensation schemes exist for the rarer case where something is missing, usually because of fraud or poor record-keeping. What protects you, and how much, depends on which company actually holds your account and which country regulates it.

Why your shares are not the broker’s money

When you buy shares through a broker, they are normally held in custody, often in the name of a nominee company, with records showing which client owns what. Rules on client assets require brokers to keep these holdings segregated from the firm’s own assets and to reconcile the records regularly. So if the broker goes bust, its creditors are paid from the broker’s own money, not from yours. An administrator’s job is then to return client assets or transfer them to another firm. That process can take weeks or months, during which you may not be able to trade, and in some countries the costs of running it can reduce what clients get back. Uninvested cash is the weaker spot: it is often pooled in client money accounts at banks, and getting it back can depend on how those accounts were set up and protected.

When compensation schemes step in

Compensation schemes are a backstop for missing assets, not insurance against a falling market. If the records are wrong, or assets have been misused, the scheme pays up to a fixed limit per person. Take a hypothetical UK example: the broker’s records show you owned shares worth £100,000, but the administrator can only find £60,000 of them. You get the £60,000 back as normal, and the FSCS can then pay up to £85,000 towards the £40,000 shortfall, so in this case you would be made whole. The limits below are as of September 2026 and can change, so check the scheme’s own website before relying on them.

• United States — SIPC: up to $500,000 per customer at a member broker, of which no more than $250,000 can be cash.
• United Kingdom — FSCS: up to £85,000 per eligible person per investment firm; the separate limit for bank deposits rose to £120,000 on 1 December 2025.
• European Union — each country runs an investor compensation scheme that must cover at least €20,000 per investor; some set a higher limit.
• Uninvested cash held at a bank on your behalf may fall under deposit protection instead, depending on how and where it is held.

What is not protected

No scheme covers a fall in the value of your investments; if the market drops 30%, that loss is yours. Beyond that, the gaps are worth knowing. Contracts for difference and other derivatives are agreements with the provider rather than ownership of an asset, so their treatment in a failure differs from shares held in custody. SIPC explicitly excludes most crypto assets that are not registered securities, and similar limits apply elsewhere. Money held with an unregulated or offshore firm may have no scheme behind it at all. If your broker lends out your shares to earn extra income, those shares are exposed to the borrower as well, usually against collateral. Fractional shares deserve a quick check too: some brokers hold them for you in custody like whole shares, while others record them only as an entitlement on their own books, which can matter if the firm fails.

Protection depends less on the app you download than on the company that holds your account.

How to check your own broker

• Which company holds my account, and which regulator authorises it? Check the name on the official register.
• Which compensation scheme covers that company, and up to what limit?
• Where is my uninvested cash held, and is it covered by deposit protection?
• Do I own the shares and funds, or hold CFDs or other derivatives on them?
• Have I opted into securities lending, and on what terms?

Many investing apps operate through several legal entities, and the one you signed up with decides which rules apply, so a few minutes with your account documents is time well spent. A broker failure is rare, and for most investors with a regulated firm the realistic worst case is delay and inconvenience rather than loss. Spreading very large sums across more than one provider can keep each account within a scheme’s limits, and keeping your own record of what you hold makes any claim far simpler. This article is general education, not personal financial or legal advice; for questions about a specific account, contact the broker or the relevant compensation scheme directly.

This article is educational and general in nature. It isn’t personalized investment, tax, or legal advice — always weigh your own circumstances, or talk to a licensed professional, before making financial decisions.

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