Client fund segregation or account segregation, is a practice commonly employed in the financial industry, particularly in regulated markets such as forex trading and brokerage services. It refers to the separation of client funds from the funds of the company or broker that holds them.
When fund segregation is implemented, client funds are kept in separate bank accounts from the accounts used for the broker’s operational and business expenses. This segregation serves to safeguard the interests of clients by ensuring that their funds are protected in the event of a broker’s insolvency or financial difficulties.
By segregating client funds, brokers are legally obligated to use the funds solely for the purpose of executing client transactions and maintaining client positions. This practice provides transparency and accountability, as it prevents brokers from using client funds for their own operations or purposes.
Fund segregation is a critical aspect of investor protection, as it helps to minimize the risk of misappropriation or misuse of client funds. It provides an additional layer of security and trust for clients, knowing that their funds are held separately and cannot be accessed or used for other purposes by the broker.
