Forex Broker Compensation Schemes: FSCS vs Cyprus ICF vs Offshore Accounts

Last checked: 24 August 2026. “Compensation scheme protected” can sound like a promise that a broker will repay every loss. It is not. The protection may depend on the exact legal entity holding your account, your client classification, the regulated activity, the type of loss and whether the firm has failed. Even the headline limit can be misunderstood: the UK’s current bank-deposit limit is not the same as its investment-compensation limit.

This article provides general educational information, not legal or financial advice. Compensation eligibility is decided under the applicable rules and facts of each case. A regulator listing, scheme limit or broker statement is never a guarantee of recovery.

Compensation is not trading-loss insurance

Three events are often confused:

• A trade loses money. Compensation schemes do not normally reimburse ordinary poor investment performance.
• A solvent broker rejects a complaint. This may lead to the firm’s complaint procedure, an ombudsman or another dispute route—not automatically to a failure-compensation scheme.
• A regulated firm fails and cannot meet an eligible claim. This is the type of event for which statutory compensation schemes may become relevant, subject to their conditions.

The distinction matters because a large headline number can create false confidence. The official UK FSCS investments page says it cannot accept claims for poor investment performance. Cyprus ICF coverage is also based on established claims against a member that fails to repay or return covered money or financial instruments; it is not a refund for an unsuccessful CFD position.

FSCS vs Cyprus ICF vs an offshore account: evidence table

Account route	What official sources currently say	What the headline does not prove	Evidence to save before depositing
UK FCA-authorised entity	FSCS may compensate a valid investment claim up to £85,000 per eligible person, per firm when the relevant firm has failed. The provider or adviser and the activity must meet the scheme’s conditions.	It does not prove every CFD balance, execution dispute or market loss is covered. It also does not mean the bank-deposit limit applies to a broker account.	Contracting company, FCA FRN, current status, relevant permissions, client classification and written confirmation of the applicable FSCS position.
Cyprus Investment Firm	CySEC states that ICF coverage is the lower of 90% of cumulative covered claims and €20,000, subject to covered-client and claim conditions.	A CySEC licence alone does not establish that you, your account and your claim qualify. The €20,000 figure is not added separately for every account.	Exact CIF name and licence, ICF membership evidence, agreement, client classification, account balances and the scheme rules checked on the same date.
Offshore or international entity	There is no single “offshore scheme.” Use the named jurisdiction’s regulator, legislation and published compensation information. For example, the Seychelles FSA maintains a capital-markets register and tells users to verify both the entity and its authority to operate in the user’s jurisdiction.	A securities-dealer listing does not by itself prove a statutory compensation fund, a recovery limit or eligibility for a foreign customer.	Regulator record, licence scope, legal entity, approved or declared domains, complaints route and an official scheme document showing member, trigger, eligibility and limit. If that document cannot be found, mark the scheme not verified.

For a worked application of this evidence table, see our Pepperstone legal-entity comparison. It shows how UK FSCS, Cyprus ICF, Australian retail safeguards and a Bahamas account must be recorded as different protection questions.

UK: the £120,000 and £85,000 numbers refer to different protection categories

From 1 December 2025, the standard FSCS limit for eligible deposits at a UK-authorised bank, building society or credit union became £120,000 per eligible person, per authorised firm. That update did not turn the investment-compensation limit into £120,000.

For investments, FSCS currently states that it may pay up to £85,000 per eligible person, per firm when the relevant firm failed after 1 April 2019. Its three-step check is more useful than the headline:

1. Confirm that the provider is authorised by the FCA or PRA.
2. Confirm that the particular activity carried out for you is regulated.
3. Ask the firm to confirm whether that activity is FSCS protected and under what circumstances.

FSCS also provides a specific evidence section for CFD and derivative claims, including transaction history and evidence concerning advice where relevant. This proves that a “CFD” label does not produce an automatic yes-or-no result. The actual claim and service must be assessed.

The professional-client and overseas-entity trap

In October 2025 the FCA warned that some CFD investors were being encouraged to opt up to elective professional status or move to overseas providers, potentially losing retail protections. The regulator specifically highlighted risks including loss of negative-balance protection and changes to how client funds may be treated. See our negative-balance protection comparison for the entity, country and client-classification checks behind that distinction. Before opting up, use our professional forex account protection checklist to compare the full set of safeguards in writing.

Therefore, save your client classification and contracting entity at account opening. A brand may have an FCA-authorised company while your own account sits elsewhere. Our guide to the same broker operating through different legal entities explains how that routing occurs.

Cyprus ICF: how the 90% and €20,000 rule works

CySEC describes the Investor Compensation Fund for investment-firm clients as a fund intended to secure covered claims against its members when the statutory conditions are met. For a covered client, the payable amount is defined as the lower of:

• 90% of the cumulative covered claims against the member; or
• €20,000.

The word cumulative matters. CySEC says the calculation applies across the covered client’s total covered claims against the member, regardless of the number of accounts, currency or—within the stated scope—place of service in the European Union.

Illustrative established covered claim	90% calculation	Illustrative ceiling before other eligibility adjustments
€8,000	€7,200	€7,200
€20,000	€18,000	€18,000
€30,000	€27,000	€20,000 statutory cap

Do not use this table until you have confirmed that the company in your own agreement is the CySEC-authorised member. A group’s Cyprus licence cannot be borrowed by a different affiliate. If you are dealing with a cross-border complaint rather than firm failure, review our UK-versus-Cyprus complaint-routing guide and the Cyprus Financial Ombudsman’s current eligibility instructions.

Offshore accounts: replace assumptions with a “scheme evidence test”

“Offshore” is a geographic shortcut, not a legal protection category. Rules differ by jurisdiction. The safe method is not to claim that every offshore account has no protection—or to assume that licensing creates protection. Instead, require an official source for each field below.

Evidence field	Pass condition	Record if missing
Scheme name and legal basis	Named in regulator, legislation or official scheme material	Not verified
Member legal entity	Exact company from your agreement appears as a member	Member not verified
Covered client	Your client type and residency are within the published eligibility rules	Eligibility not verified
Covered event	The official material identifies firm failure or another trigger relevant to the claim	Trigger not verified
Covered claim	The service, money or instrument falls within the published scope	Claim type not verified
Limit and calculation	Currency, percentage, cap, aggregation and deductions are published	Amount not verified
Application route	Official claim page, authority and deadlines are identifiable	Recovery route not verified

The Seychelles FSA’s public guidance offers a useful starting point: verify the entity in its capital-markets register, check whether it is appropriately licensed to operate in your jurisdiction, understand the company and read the terms before paying money. But a register match answers the licence question. It does not automatically answer the compensation question.

Seven-step pre-deposit compensation check

1. Download the client agreement before funding. Save a dated copy; the website footer alone is not enough.
2. Copy the complete legal name. Include Ltd/Limited, registration number, licence number and registered address.
3. Search the regulator’s own register. Match status, permissions, domain and contact details. Start with our practical broker-regulation verification guide.
4. Record your client classification. Retail, professional and eligible-counterparty classifications can produce different protections.
5. Find the scheme’s official page. Record its name, official URL, member requirement, covered claim, exclusions, limit and last-check date.
6. Ask a precise written question. “If the contracting entity fails and cannot return client money, which statutory scheme applies to this account, and where can I verify membership and eligibility?” Save the answer, but verify it independently.
7. Match the payment recipient. If the payee or processor introduces another company, document its role before transferring funds. Use our legal-entity verification workflow for the three-way match.

Build a dated protection record—not a permanent broker score

Compensation rules, firm permissions, legal entities and client terms can change. A useful broker check therefore includes:

• evidence URL;
• date and time checked;
• exact legal entity and licence number;
• client country and classification;
• scheme name and membership evidence;
• published trigger, cap and important exclusions;
• the agreement version and a saved copy.

This is the same evidence-first logic built into the FXPEDIA360 Broker Safety Checklist and the forthcoming Verified Start broker and risk system: a field is not marked verified merely because a broker’s marketing page states it.

Common mistakes that invalidate a protection comparison

• Using the brand instead of the legal entity. Compensation normally attaches to the member company and eligible claim.
• Mixing bank and investment limits. The UK’s £120,000 bank-deposit limit should not be presented as the broker investment limit.
• Counting each trading account separately. Scheme caps may aggregate claims per eligible person and firm/member.
• Treating negative-balance protection as insolvency compensation. Negative-balance protection limits CFD liability under specified retail rules; it is not the same mechanism as a failed-firm compensation scheme.
• Assuming “regulated” means “compensated.” Licensing, conduct supervision, complaints and compensation are separate layers.
• Relying on an undated comparison article. Recheck the regulator, scheme and agreement immediately before depositing.

Final decision rule

A compensation scheme should be the last line in your broker evidence record, not the first line in an advertisement. Verify the company, permissions, client classification and client-money arrangements first. Then confirm the exact scheme and its rules. If any link in that chain is missing, do not replace evidence with a logo, a group licence or a headline limit.

Compensation coverage is one layer of a wider broker check. Use the Forex Broker Safety Guide to place the scheme beside the legal entity, licence scope, client-money rules and the route available if a dispute occurs.

Compensation limits should be read beside the rules governing the actual account. The FCA, CySEC and Bahamas legal-entity comparison shows how FSCS, Cyprus ICF and an offshore account differ within a wider protection check.

Official sources and verification log

• FSCS — Investment compensation and protection. Checked 24 August 2026.
• FSCS — What we cover, including current deposit and investment limits. Checked 24 August 2026.
• FSCS — Evidence required before making a claim, including CFD/derivative claims. Checked 24 August 2026.
• FCA — How to check a firm or individual is authorised. Checked 24 August 2026.
• FCA — Warning on CFD investors losing retail protections, 30 October 2025. Checked 24 August 2026.
• CySEC — Investor Compensation Fund information. Checked 24 August 2026.
• CySEC — How to complain about a Cyprus Investment Firm. Checked 24 August 2026.
• Office of the Cyprus Financial Commissioner. Checked 24 August 2026.
• ESMA — 2026 reminder on CFD product-intervention protections. Checked 24 August 2026.
• Seychelles FSA — Capital Markets regulated entities. Checked 24 August 2026.
• Seychelles FSA — Awareness of securities-dealer business. Checked 24 August 2026.