Explainer · Costs & Regulation
Investor protection schemes: what is and isn't covered
Investor protection schemes step in when a firm holding your money or investments fails and cannot give them back. They do not repay you when your investments simply lose value.
Quick answer
SIPC protects up to $500,000, including $250,000 cash, when a US member broker fails [1]. The UK FSCS covers up to £85,000 per person, per firm [2]. Neither pays for falling prices, and crypto platforms are generally outside both.
Key points
- These schemes cover a failed firm that cannot return your assets, not market losses [1].
- SIPC: a $500,000 limit, which includes a $250,000 limit for cash [1].
- UK FSCS: up to £85,000 per eligible person, per firm, for firms that failed on or after 1 April 2019 [2].
- EU law sets only a minimum, written as ECU 20 000 per investor in the 1997 directive [3].
- US retail forex deposits are not protected [5], and crypto firm accounts lack SIPC or FDIC type cover [6].
On this page
What does an investor protection scheme actually do?#
It deals with one specific disaster: the firm holding your investments goes out of business and your cash or securities are missing. SIPC, the US scheme, says it protects against the loss of cash and securities held by a customer at a financially troubled member brokerage [1]. The UK's FSCS says it may pay compensation when a provider goes out of business and there is a shortfall in the money or assets it holds for you [2].
The EU set the same idea in law in 1997. Each member state must have at least one investor compensation scheme, and authorised investment firms must belong to one [3]. Cover applies when a firm cannot repay money or return instruments it held for investors [3].
How much does each scheme cover?#
The limits differ by country and by what is covered. The table puts the main figures side by side. Note that the FDIC is not an investor scheme at all: it protects bank deposits, and its own page lists stocks, bonds, mutual funds and crypto assets among the things it does not insure [4].
| Scheme | Limit | What it covers |
|---|---|---|
| SIPC (US) | $500,000, incl. a $250,000 cash limit [1] | Cash and securities missing at a failed member broker |
| FSCS investments (UK) | £85,000 per eligible person, per firm [2] | Shortfall when an authorised firm fails on or after 1 April 2019 |
| EU investor compensation | At least ECU 20 000 per investor [3] | Money or instruments a failed investment firm cannot return |
| FDIC (US banks) | $250,000 per depositor, per bank, per ownership category [4] | Bank deposits only, not investments |
The EU directive of 1997 sets a minimum in ECU; national schemes set their own actual limits, which our sources do not list.
The UK limit has changed over time. For firms that failed between 1 January 2010 and 31 March 2019, FSCS cover was up to £50,000 per eligible person, per firm [2]. Always check which limit applies to the date a firm failed.
What do the limits mean in practice?#
These are worst-case sums. Our sources do not describe how much of a failed firm's assets are usually recovered, or how long a payout takes, so treat the limit as a ceiling, not a promise of speed or of full repayment.
Are forex, CFDs and crypto protected?#
Mostly not. SIPC lists commodity futures contracts and foreign exchange trades among the things it does not protect, and says unregistered digital asset securities are not covered even at a SIPC member [1]. For US retail forex, the CFTC's advice is blunt: your deposits are not protected, and if a dealer disappears or goes bankrupt you may not get your money back [5].
Crypto is the clearest gap. The SEC warns that accounts with crypto asset firms do not get the protections that broker and bank accounts generally have [6]. In the UK, the FSCS says it cannot protect you if a platform that exchanges or holds crypto goes out of business [7]. See crypto regulation basics and custodial vs self-custody for what that means for where you keep coins.
For CFDs, ESMA warned in 2013 that if client money is not properly kept separate and the provider gets into financial difficulty, you may not get back money owed to you [8]. FSCS cover needs both an authorised firm and a regulated product and service [2], so ask the provider whether your account qualifies.
How do you check whether your account is protected?#
- Confirm the firm is regulated
Look it up on the official register before you deposit. Our guide on how to check if a broker is regulated lists where to look.
- Check the product type
Stocks and bonds can be covered; forex trades, commodity futures and unregistered digital asset securities are outside SIPC [1].
- Add up what you hold at each firm
The FSCS limit is per firm [2]. Compare your total at each firm with the limit.
- Keep your own records
Save statements and trade confirmations. If a firm fails, they help show what it held for you.
Mistakes beginners make with investor protection#
- Treating SIPC like a bank guarantee
The FDIC insures bank deposits and lists stocks, bonds and crypto as not insured [4]. SIPC is a separate protection for missing cash and securities at member brokers.
- Assuming crypto on an app is covered
Accounts with crypto firms do not get SIPC or FDIC type protection [6]. A crypto app can look like a broker and still offer none of it.
- Writing the EU minimum as a euro figure
The 1997 directive says ECU 20 000, and your country's scheme may pay more [3]. Check your national scheme's own figure.
Frequently asked questions#
Does SIPC protect me if my shares fall in value?
No. SIPC says it does not protect against a decline in the value of your securities [1]. It deals with missing cash and securities when a member broker fails.
Is the FSCS limit per account or per firm?
Per eligible person, per firm [2]. Several accounts at the same firm share one limit.
Is my forex account protected?
Does MiCA give EU crypto users a compensation scheme?
Our sources do not describe one. The 1997 EU directive covers investment firms [3]; read crypto regulation basics for what MiCA does cover.
The bottom line#
Investor protection schemes are a backstop for one event: a firm that fails and cannot return what it held for you. SIPC, the FSCS and EU schemes each have limits, and none repays market losses. Forex deposits and crypto accounts usually fall outside them. Check the firm, the product and how much you hold there before you deposit, and read our risk disclosure.
Sources
- What SIPC Protects.
- Investments | FSCS (What we cover).
- Directive 97/9/EC of the European Parliament and of the Council of 3 March 1997 on investor-compensation schemes.
- Understanding Deposit Insurance | FDIC.
- Customer Advisory: Eight Things You Should Know Before Trading Forex.
- Exercise Caution with Crypto Asset Securities: Investor Alert.
- Five things to consider about cryptoassets.
- Contracts for difference (CFDs).
Education only. This page is not investment, tax or legal advice. Trading and crypto can lose you money. See our risk disclosure.
