To invest our money in the stock market. We have to go through a stock account. But the question that everyone has already asked is… Bankruptcy of a stock account: Does the client lose everything?
Recommended products
⚠️ This article is a summary of some regulations. However, it is the reader's responsibility to check the legal details of their investments! A second opinion with a legal professional is recommended.
Bankruptcy of a stock market account: what happens to your money?
You've decided to invest in the stock market, but one question keeps nagging at you: “What if my broker goes bankrupt?” Am I going to lose everything? ?
The answer is often No, However, this depends on the rules of the country where your account is hosted and the terms and conditions of your courier service. Here's what you need to know to invest with peace of mind.
Can a bank or broker go bankrupt?
Yes, it's possible. Recent examples include Credit Suisse Or FlowBank have proven it. But rest assured: in Western countries, stock market accounts are often strictly regulated and protected by security mechanisms.
Asset segregation: an essential protection
There asset segregation is a legal obligation in some countries that requires brokers to separate your securities (stocks, ETFs, etc.) and your cash from their own assets. Why is this crucial?
- Your titles cannot be used by the broker for their own needs (e.g. loans, risky investments).
- In the event of bankruptcy, Your assets are protected. and must be fully restored or transferred to another broker.
- Without this separation, your investments could be mixed with the broker's funds and lost in case of default.
It's a basic warranty in regulated countries (Switzerland, EU, United Kingdom, United States).
What happens in case of bankruptcy?
🇨🇭 In Switzerland (Yuh, Neon, Saxo, etc.)
There FINMA* (Swiss Financial Market Supervisory Authority) requires brokers to separate your assets from theirs. In case of bankruptcy:
- Your cash flow are protected up to 100,000 CHF.
- Your securities (stocks, ETFs, etc.) you are transferred in full to another broker of your choice.
Concrete example During the bankruptcy of FlowBank in 2024, clients received their funds in cash (up to CHF 100,000) and their securities were transferred to less than 3 months.
🇬🇧 In the United Kingdom (Interactive Brokers UK)
Interactive Brokers (IB) is regulated by the FCA (Financial Conduct Authority) and protected by the FSCS (Financial Services Compensation Scheme). In case of bankruptcy:
- Up to GBP 85,000 for your cash flow.
- Your titles are segregated and protected until 500,000 USD (via the SIPC American, because IB UK collaborates with IB LLC in the United States).
🇺🇸 In the United States (Interactive Brokers LLC)
If your account is managed by Interactive Brokers LLC (American entity):
- Your cash flow are protected up to USD 250,000 (via the SIPC).
- Your titles are protected up to 500,000 USD (via the SIPC), with a compulsory segregation assets. In case of bankruptcy, your securities are transferable to another broker, up to a limit of USD 500,000.
🇪🇺 Within the European Union (e.g., DEGIRO in the Netherlands)
The rules vary from country to country, but for DEGIRO :
- Your cash flow are protected up to 100,000 EUR.
- Your titles are only up to 20,000 EUR (a low ceiling for large investors).
⚠️ Attention : If you invest more than 20,000 EUR in securities with DEGIRO, the risk is higher in case of bankruptcy.
3 key points to check before choosing your broker
- Asset segregation Are your securities and cash assets separated the broker's assets?
- Liquidity protection limit How much of your cash funds are guaranteed?
- Securities protection limits Are your stocks/ETFs fully transferable In case of bankruptcy?
Summary of protections per broker
| Broker | Country | Liquids | Securities |
|---|---|---|---|
| Interactive Brokers | United Kingdom/USA | USD 250,000 | 500,000 USD |
| DEGIRO | Netherlands (EU) | 100,000 EUR | 20,000 EUR |
| Yuh / Neon | Swiss | 100,000 CHF | Unlimited (transfer) |
Conclusion: Is your money safe?
Yes, but not everywhere in the same way.
- In Swiss, your titles are fully transferable, and your cash is well protected up to CHF 100,000.
- In the’EU, Securities protection depends on the broker; note that sometimes the protection is very low (e.g., only 20,000 EUR at DEGIRO).
- With IB US version, your securities are protected up to USD 500,000 and your cash up to USD 250,000.
I strongly advise you to check before investing. always your broker's guarantees in case of bankruptcy.
⚠️ This article summarizes the applicable regulations, but it does not replace personalized legal advice. If in doubt, consult a professional.
Subscribe for the latest news
You have a frugalist or minimalist project and you want a training? Click ”here”.
My pages
- About me
- Saving / Frugalism
- Blog
- Shop
- Contact
- Training and E-book
- Invest
- Minimalism
- My account
- Newsletter
- Basket
- Order confirmation
Lastest Post
- Investing Abroad: What the Exchange Rate Doesn't Tell You
- How to optimize your 2nd pillar?
- 2nd pillar: The basics to understand
- Top 5 tips to make money from home
- How to invest 1200 CHF – Simplified version
How does this blog live?
Overall, this blog lives on sharing a frugal and minimalist lifestyle.
For a question of transparency towards the readers. All recommended products are in order to make life cheaper, simpler and to promote the essentials.
Basically, my only income with this blog comes:
- Trainings that I realize
- Promo codes for the products I use
- Donations that readers make in exchange for neutral information.
About me
I decided to create this blog to develop and help readers who are looking for a simpler and more economical life.
Compared to before, I was a person who consumed a lot until the day I realized that my consumption made me sadder and poorer 😑
Now I prefer the minimum of my needs to be happy and achieve my financial freedom.
Without realizingI started to focus on saving and investing to depend on a boss for as little time as possible and to speed up my personal projects.
For several years I have felt happy and I have become richer in a way that I would never have imagined given that I have an average salary in Switzerland.
It is for this purpose that I decided to create this blog. In order to share and learn with other people who seek freedom and simplicity 😉
Are you rather minimalist or frugal Jonny?
I am as minimalist as I am frugalist. However, there are situations where I lean more towards an art of life.
To conclude, I think the most important thing is to feel comfortable in your lifestyle 😊
Bankruptcy of a stock account: Does the client lose everything?
Leave a Reply