[Lachlan]

Hello everyone,

I am an active trader in Australia with a question about the level of protection I’m entitled to if my trading company goes south.

I believe that the US cover traders to the tune of $500,000 through the SIPC and I’ve read online that the UK covers traders to £85,000 through the FSCS. But as an Aussie resident I assume I won’t be covered by that.

However I can’t find anything online to suggest Australia has an equivalent scheme? Am I right in thinking this and if yes, is there an alternative I can access? I don’t get why we wouldn’t have anything in Aus.

I know some companies have gone under in recent years and don’t want to trust a large sum without any cover.

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Topic

[Christian Harris]

Unlike the UK and the US, Australia does not have a formal investor compensation scheme specifically for losses incurred due to broker insolvency or misconduct.

ASIC does, however, require financial services licensees to have adequate compensation arrangements in place.

This typically involves holding professional indemnity insurance to cover claims of negligence or misconduct.

Brokers must also segregate client funds from their own operational funds to protect clients in case of broker insolvency.

Have a further read here: https://www.daytrading.com/brokers/regulated/asic

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[James Barra]

Hi Lachlan,

Adding to Christian’s reply, the lack of investor compensation makes it important to:

• Choose a well-established, tightly-regulated company that is financially stable. For example, publicly traded brokers like IG (ASIC-regulated) are required to submit audited financial statements, painting a transparent picture of their financial health.
• Spread your investments to help manage risk. Day trading is high risk, especially if you’re interested in markets like cryptocurrency. You may want to consider additional investment vehicles and trading strategies.

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