Investors and traders who open a Forex Account frequently wonder if their money is really safe.
"What happens to my trading account if my broker goes bankrupt?"
"Will the money in my Forex account still be there if I ever want to withdraw it?"
These are valid questions regarding the safety of funds when it comes to Forex investments.
Investors have been burnt too many times before not to ask them.
Take for example the largest Forex insolvency case in history, when the NFA-registered REFCO Corp. went bankrupt shortly after going public in the US stock market in 2005, leaving all Forex account holders in the dust – and their money used to pay off REFCO creditors.
Since REFCO, there have been many cases of Forex firms becoming insolvent and all accounts being lost.
So is there any way for FX account holders to protect themselves against a broker collapse?
Forex Trust Account to the Rescue
The answer is "YES." It's called the Forex Trust Account and it protects the money of account holders in the unforeseen event that their broker goes under.
Please note that we're not talking about the accounts of US brokerage firms that are registered with the NFA here. Opening a Forex account with an NFA broker does not protect a Forex client in the event of a bankruptcy (see REFCO discussion above).
A trust account service is an expensive option for brokerage firms. That is why most companies don't bother to offer it, even though the accounts do provide a maximum level of safety for clients.
Forex trust accounts are completely segregated from the brokerage firm's assets. The money is held by an independent custodian Trustee, who administers the assets for the protection of the client; so if a Forex broker goes bankrupt, all funds in customer accounts are protected.
Forex Trust Account Minimums
Most brokerage companies do not allow their clients to open Forex accounts under a trust structure.
The ones that do usually only allow clients with very large accounts (typically 500K or 1M+ USD) to set it up.
But not all Forex brokerage firms fall under the same category…
For the first time ever, Forex account holders can open trust accounts regardless of their account size. Even if you open an account with the minimum of US$250, you could take advantage of the trust account structure.
All it takes is a small, one-time setup fee of US$50.00 to get started. You can convert to the trust account structure in your member's area after the account is opened online.
Never again will traders have to worry about losing the funds in their Forex trading accounts due to broker fraud or bankruptcy (visit our account section if you're interested in opening an account online or to learn more).
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