This guide answers the question many traders only ask after a headline: what happens if my broker goes bust? It sets out what European investor compensation actually covers, how much it pays, why it never covers trading losses, and what to check before you open an account. Every figure below comes from the official scheme or EU pages listed in the sources at the end, checked in October 2026.
What Happens If Your Broker Goes Bust?
In short: an administrator takes control, client money and assets that were correctly kept separate from the firm's own funds are returned to clients, and a compensation scheme steps in only for the shortfall, up to a limit. For most clients of a well-run firm, segregation does the heavy lifting. Compensation is the safety net for when segregation failed, records were wrong, or money went missing.
The process is slower than people expect. Positions are usually closed, balances are reconciled, and claims are verified before anything is paid. Plan for months, not days.
Bank Deposit, Investment Claim or Trading Loss: Which One Is Yours?
These three are protected very differently, and confusing them is the most expensive mistake in this topic.
| What you have | Protected by | EU level | What it does not cover |
|---|---|---|---|
| Cash in a bank account | Deposit guarantee scheme | Up to €100,000 per depositor per bank | Money held at an investment firm |
| Money or assets held for you by an investment firm | Investor compensation scheme | Minimum €20,000 per investor | Losses from investment risk |
| Money lost on trades | Nothing | None | Everything: a market loss is not a claim |
The European Commission's page on investor compensation schemes is blunt about the third row: the directive "does not cover investment risk, such as when an investor has bought stocks which then fall in value." The €100,000 bank figure comes from the Commission's page on deposit guarantee schemes, and it protects bank deposits, not your trading account at a broker.
How Much Does Investor Compensation Pay in Europe?
The EU sets a floor, not a single number. Under the 1997 Investor Compensation Schemes Directive (97/9/EC), every member state must run at least one scheme with a minimum of €20,000 per investor, and every investment firm must belong to one. Countries may pay more. That €20,000 floor has not moved since 1997: the Commission proposed raising it to €50,000 in 2010, but the proposal was not endorsed and was withdrawn in March 2015.
Two schemes show how the details differ:
| Scheme | Maximum | How it is calculated | Who can claim |
|---|---|---|---|
| Cyprus Investor Compensation Fund (CySEC) | €20,000 | The lower of 90% of your covered claims and €20,000 | Non-professional (retail) clients of member firms |
| UK Financial Services Compensation Scheme (FSCS) | £85,000 | Per eligible person, per firm, for firms that failed after 1 April 2019 | Eligible persons; claims for poor investment performance are excluded |
Cyprus matters because many brokers serving European retail clients are authorised there; the figures are from CySEC's Investor Compensation Fund page. The UK is no longer in the EU, but many European traders use UK firms, and the FSCS figures are from its page on investment protection. Note the 90% rule in Cyprus: even a small claim is not repaid in full.
A Worked Example: Three Clients of a Failed Cyprus Broker
Imagine a Cyprus-authorised broker collapses. Three retail clients each showed €30,000 on their account screens. The numbers are hypothetical.
The administrator returns €18,000 of A's money from the segregated client account. The remaining verified claim is €12,000. The scheme pays the lower of 90% of €12,000 (€10,800) and €20,000, so €10,800. A recovers €28,800 of €30,000.
Nothing is recovered from client accounts, so the full €30,000 is a claim. 90% of that is €27,000, but the cap is €20,000. B recovers €20,000 and loses €10,000.
C had deposited €38,000 and lost €8,000 on gold trades in the weeks before the collapse. That €8,000 is not a claim against anyone; it went to the market. Only the €30,000 balance is assessed, exactly as for A or B.
| Client | Shown balance | Returned from segregated funds | Verified claim | Scheme pays | Total recovered |
|---|---|---|---|---|---|
| A | €30,000 | €18,000 | €12,000 | €10,800 | €28,800 |
| B | €30,000 | €0 | €30,000 | €20,000 | €20,000 |
| C | €30,000 (after losing €8,000 trading) | As for A or B | As for A or B | As for A or B | The €8,000 is never recovered |
The lesson of Client B: above roughly €22,222 of claims in the Cyprus scheme (because 90% of €22,222 is €20,000), every extra euro sits outside the compensation limit. The lesson of Client C: compensation protects you from the firm, never from the market.
What Does Investor Compensation Not Cover?
More than most traders assume. Based on the official pages above:
- Trading and investment losses. Prices going against you is investment risk, which the EU directive and the FSCS both exclude.
- Professional clients. The Cyprus fund covers non-professional clients. If you opt up to professional status, read exactly what you give up, including the retail protections described in our guide to ESMA leverage limits and negative balance protection.
- Firms outside the scheme. Many brands run a European entity and an offshore entity under the same logo. If your client agreement is with the offshore company, the European scheme does not apply to you, whatever the website footer says.
- Amounts above the cap. Spreading money across different firms can help; spreading it across accounts at the same firm does not, because limits apply per investor per firm.
How Do You Check Your Protection Before Opening an Account?
Five checks take about twenty minutes:
- Find the legal entity named in your client agreement, not the brand name.
- Look that entity up on the regulator's own register and confirm the licence number and status.
- Find the scheme it belongs to, usually stated in the firm's investor compensation disclosure, and note its limit and percentage rule.
- Confirm your classification as a retail client, and keep it unless you fully understand the trade-off.
- Ask where client money is held and whether it is segregated from the firm's own funds.
None of this tells you whether a provider is any good at trading. A licence speaks to a firm's conduct and safety, not to its skill. For skill, look at an independently verified history of real results, read properly: our guides to evaluating a trading provider in Europe and reading a Myfxbook track record explain how, and TIC's own verified record is public at /results as one example of what that disclosure looks like.
Sources
- European Commission, Investor compensation schemes
- EUR-Lex, Directive 97/9/EC on investor-compensation schemes
- European Commission, Deposit guarantee schemes
- CySEC, Investor Compensation Fund
- FSCS, Investments: what we cover
Scheme rules change. Check the official page for your firm's scheme before relying on any figure here.
Trading carries high risk and you may lose your capital. Past performance does not guarantee future results. Educational only, not investment advice.
Verify any trader's results in 10 minutes
Seven checks that reveal whether a track record is real: third-party verification, maximum drawdown, trade count, and the martingale warning signs. Use it on anyone — including on us.
We'll send the checklist plus occasional TIC insights. We never share your email, and you can unsubscribe any time.
