A segregated account is used by Payment Service Providers and other financial entities that handle clients finances – such as FOREX brokers – to keep client’s funds separate from the company’s working capital. This ensures that customer funds are never misappropriated or collected by debt collectors in case of bankruptcy. Segregated accounts also make it easier for a client to get their money back if they dispute a transaction.
Segregated accounts are highly coveted by customers since they have multiple benefits.Clients have peace of mind because they have control over their money (they can deposit and withdraw whenever they like) and they are assured that the business cannot interfere with it or use it fraudulently.
These accounts are highly coveted by brokers due to their attractiveness to clients. However, they are very expensive to acquire and set up. They also tend to have very strict regulatory requirements. Due to these difficulties, some scammers may be tempted to mislead clients about segregated accounts. If a customer entrusts their money to one of these scammers, it may be exposed to fraud and misappropriation. To avoid getting scammed you should only trust large, established brokers.
One of the major misconceptions about segregated accounts is that you get an individual bank account with the broker. However, in a segregated account, your funds are commingled with other client’s money.
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This page was last updated on December 14, 2021.