Financial Conduct Authority (FCA) CASS 7 Segregation
The Formal Definition
Strict statutory client-money protection regulations enforced by the UK Financial Conduct Authority under Chapter 7 of the Client Assets Sourcebook (CASS), requiring regulated brokerages to hold retail customer cash in designated, legally segregated trust accounts at approved banks, completely isolated from firm operational capital.
Statutory Mandate: Daily Physical Client Money Reconciliation → Segregated Client Bank Account Balance ≥ Total Net Retail Client Cash Obligations at all times
Cole Barrett's Reality Check
The Unvarnished Bottom Line"CASS 7 is the gold standard of keeping brokers honest. In the UK, an FCA-regulated broker cannot take your uninvested cash and use it to pay their office rent or fund proprietary trades. Under CASS 7, your cash sits in a legally ring-fenced trust account at a Tier-1 bank with your name on it. If the brokerage goes bankrupt tomorrow, their creditors cannot touch your cash—it gets handed right back to you."
Interactive Simulator: Test the Math
Real-World Example: Scenario Breakdown
Examining the real numbers for: Holding £100,000 in uninvested cash during the sudden corporate insolvency of an online trading brokerage
| Execution Metric | FCA CASS 7 Protected Client (Regulated UK Broker) | Offshore Unregulated Entity Client |
|---|---|---|
| Fee / Rate | Standard regulated fee tier | $0.00 'free' |
| Spread / Buffer | Funds held in daily-reconciled, ring-fenced trust account under FCA CASS 7 rules | Registered with an offshore subsidiary (St. Vincent / Bahamas) lacking CASS rules |
| Execution / Status | Broker collapsed into administration due to corporate mismanagement | Broker commingled customer deposits with internal corporate operating accounts |
| Total Cost / Result | Zero loss of client capital during brokerage bankruptcy | Suffered total loss of deposited funds in liquidation proceedings |
How Brokers Weaponize This Term
UK-based brokerages market their FCA regulatory status heavily, but automatically route international retail signups to unregulated offshore entities where strict CASS 7 segregation protections do not apply.
Broker Evaluation Matrix
Cole Approves
IG / Pepperstone (UK): Fully compliant with FCA CASS 7 client money rules, maintaining daily automated bank reconciliations and independent client trust accounts at Tier-1 UK banks.
Read Audit →Cole Flags / Avoids
Offshore Clone Operators: Markets UK brand prestige while onboarding international customers into unregulated offshore shells that lack client money segregation rules.
View Trap Details →Frequently Asked Questions
What happens if a bank holding CASS 7 client money fails?
If the third-party custodian bank fails, eligible retail clients are protected up to £85,000 per person under the UK Financial Services Compensation Scheme (FSCS).
What is an FCA 'acknowledgment letter' under CASS 7?
A mandatory legal document signed by the custodian bank explicitly confirming that the funds held in the account are client money belonging to customers, barring the bank from offsetting the cash against the broker's debts.