Thread: segregation of funds

'Client funds are held in customer segregated trust accounts with the National Australia Bank or HSBC, each of which are AA Rated banks.' . . .does this suggest a government guarantee on deposits in the event of a business collapse? . . .or simply just ensures that no trading is done by the broker with customer deposits? . . .if it's that the latter is there a way to confirm rather then to just believe statement?

The preceding was sent to pepperstone customer services, awaiting answer. . .but if anyone can shed some light that the better?

Originally Posted by ;

'Client funds are held in customer segregated trust accounts together with the National Australia Bank or HSBC, both of which are AA Rated banks.' . . .does this suggest a government guarantee on deposits in case of a business collapse? . . .or simply ensures that no trading has been achieved by the broker together with customer deposits? . . .if it is that the latter is there a way to confirm rather then to just believe statement?

The preceding was delivered to pepperstone customer services, awaiting reply. . .but if anyone here can shed some light that the better?

There is not any deposit guarantee by the authorities just by maintaining the capital segregated.

What they mean is, instead of just deposit turning into a liability on their balance sheet and also the funds getting additional working capital in the organization's disposal (so if the company runs red ink they just dip into customer funds on the books to cover their bills... or use customer funds for different purposes.) They keep all customer deposits separate in a particular account meant just to maintain client funds rather than to be used for anything else aside from covering off the liability of your deposit on their balance sheet.

In theory, this should make them protected from the company making bad decisions with the excess money... and in certain controlled nations, lenders can't put a lean on customer funds marked as such at a segregated account should the company go bankrupt...

HOWEVER, just like the case of MF International, there is some things that the company usually reserves the right to do with said capital in order to make a return on holding them OR in order to account for collateral the customers put up in an advantage they buy/sell (ie, you buy a crap tonne of bonds, it's your funds used to buy them, so they can't still be sitting at the segregated account now can they? Or, you put up a margin sum to buy something different, the capital will need to be in the disposal of the company to guarantee the place, so they also are not actually from the segregated account either...)

All that aside, I'd much rather use a broker which takes that excess step instead of considering the capital as part of the operating capital or assets to be used internally.


As for government protection in general, go with a broker that offers coverage on investment accounts form the local authorities sponsored investment insurance plan. They are not tough to discover. Some brokers in the united states offer this and that I use Oanda Canada where my whole account is protected up to $1 million in case Oanda goes out of business through CIPF thanks to me being a Canadian citizen. Do some research here on what your government has to offer and which brokers are tapping into such defense. . .This alone is a great reason to go with a locally controlled broker as they often tie into local government investment progr and account forms.

Jack is correct, segregated means nothing greater than funds held separate to company cash.

Since banks in Australia don't give the same guarantees for broker customers as those offshore, there is little you can do besides chose as a respectable firm with good corporate governance. Pepperstone don't possess their own AFSL, I think that says enough about the company.

Thank you alot for answers men....pepperstone c/s sent me a link for their legal docs-nothing new....looking at some tips from aussie attorneys' about the businesses act which takes the segregation of accts in australia, this isn't a complete proof safety net for deposited funds, they could still dip into the pool to 'meet duties whether behalf of customers or third parties,' among other items....will put capital across multiple brokers-can't trust anyone completely.

From a 'security of capital' pov only what is the advantage of futures over spot Foreign Exchange?? . . .obviously they'd be exchange traded which would mitigate transaction risk but is regulation about the broker a lot more stringent for instance?

Gusbus who do u commerce with(if you want to share)?

1 Attachment(s)) Hello Friends !!

Yesterday I chat with LMAX representative, LMAX is ready to give details of segregated clients trust account for its each customer.

Further I asked concerning the security on clients deposits in the event of a company collapse so that they replied me !!


Please visit attachment





Kindly note that I am not affiliated to LMAX or some other brokerage firm
https://www.forexforum.co.za/general...ty-knocks.html

Hi ms1,

I would rather not say who use. I would prefer to stay broker neutral and just offer feedback based on my experience with a firm.

Should you ask about a specific broker and ive had an account with them I would be delighted to give feedback.

Simply to include;

The Gov't guarantee referred to above relates to the bank going broke, not a third party (broker) conducting an account with your cash. Is presently for account balances around $250,000-.

Segregation doesn't imply your funds are separate from mine, they're lumped together and with yours, likely to be well over $250,000!

There was an instance in the united kingdom a couple of years back where the Adminior was asking for asserts (substantiated) because the broker's account keeping of segregated accounts was that poor they couldn't tell just how much each client was entitled to.

Normally the client funds will be maintained with reputed banks and also some other change in the customer's account equity would be corrected with a fitting withdrawal/payin into the account - this that client funds are not utilized for trading. Segregation by itself does not guarantee any payment by the authorities in case the broker fails, unless the broker is registered with designated authorities that also cover part/all of the client capital.

Please be aware that the MF Global wreck occurred in spite of rigorous principles from the US regarding segregation of client funds - so take nothing for granted.

ASIC is quite tough on using client funds, not only on segregation and in the wake of MF Global they're getting even harder.

By doing what?