If your broker goes bankrupt
Securities belong to you and don't fall into the bankruptcy estate. Cash in the settlement account is a deposit and only protected up to €100,000.
Learning objective: After this lesson, you can explain what happens to your securities and your cash if a broker becomes insolvent.
Many people ask this before their first deposit, and the answer is more reassuring than most expect. Your securities belong to you, not the broker. It only holds them for you.
If it goes bankrupt, your holdings get transferred to you or to another institution. They aren't part of the bankruptcy estate and don't belong to the broker's creditors.
It's different for cash sitting uninvested in the settlement account. That's a normal deposit and protected by statutory deposit insurance up to €100,000 per customer per institution.
Practical takeaway: don't leave large amounts uninvested for months. And with crypto, none of this applies. Coins on an exchange are, in many cases, legally not segregated assets, which means completely different rules apply there.
The separation between the broker's own assets and client assets is a regulatory requirement. Securities are typically held in collective custody at a central securities depository, with the client acquiring co-ownership of the pooled holding. That co-ownership grants a right to have the assets carved out in an insolvency.
The remaining risk isn't an ownership risk, it's an operational one: irregularities in record-keeping or improper use of client holdings can create a shortfall. Investor compensation schemes cover this case, with coverage considerably lower than deposit insurance, typically a percentage up to a fixed ceiling.
For crypto assets, the legal position depends on how custody is structured and where the provider is based. At centralized exchanges without segregated custody, there's usually only a contractual claim to have the assets returned, which becomes an ordinary claim in an insolvency. This exact structure has cost customers dearly in several past collapses.
| Place | Legal status | If the provider goes bankrupt |
|---|---|---|
| Securities in your brokerage account | segregated assets, your property | carved out and transferred to you |
| Cash in your settlement account | a deposit | protected up to €100,000 per institution |
| Fund units | segregated assets | not part of the bankruptcy estate |
| Crypto on a platform | often just a claim | an ordinary claim in proceedings |
| Crypto in your own wallet | you hold the keys | unaffected, but you bear the loss risk yourself |
| CFD account | a contract with the provider | a claim against the provider |
Summary
- Securities are your property and protected from insolvency.
- Uninvested cash is a deposit and only protected up to €100,000.
- That protection usually doesn't apply to crypto held on an exchange.
Did you get it?
What happens to your stocks if your broker becomes insolvent?
They're your property, get carved out, and transferred. They aren't part of the bankruptcy estate.
What does investor compensation protect against?
Shortfalls from irregularities in custody, with much lower coverage than deposit insurance.
Why is the situation different at crypto exchanges?
Without segregated custody, there's often only a contractual claim, which becomes an ordinary claim in an insolvency.
What others often ask about this
Is my money gone if my neobroker goes bust?
Your stocks and ETFs belong to you and are held separately from the broker's own assets. They aren't part of the insolvency. Cash on the settlement account is covered by the bank's deposit guarantee up to €100,000.
And if securities are missing anyway?
For that rare case the EU has investor compensation schemes. They cover at least €20,000, in Germany 90 percent up to that amount. They don't protect against price losses.
Check your understanding
Sources and further reading
- Germany's financial regulator BaFin explains the statutory deposit guarantee of up to 100,000 euros per customer and bank, and the separate, much lower investor compensation scheme covering 90 percent of a claim up to a maximum of 20,000 euros. View source ↗