Segregated or Pooled: Reading the Terms That Decide It
Two sentences in the terms of service determine whether your assets are yours in an insolvency. Here is how to find them.
The exposure is that assets described as yours may form part of a failed firm’s estate. The terms of service decide it, and the relevant wording is short.
What to search for
Open the terms and search for segregat, for title, and for beneficial. Three searches, two minutes.
The sentence that is good
Language stating that client assets are held separately from the firm’s own assets, that the firm does not acquire title, and that assets are held on trust or in a designated client account.
That combination is what makes assets identifiable as yours when a liquidator arrives.
The sentence that is bad
Language stating that the firm may use, lend, pledge or rehypothecate client assets. Or that title transfers to the firm on deposit.
Where title transfers, you are an unsecured creditor by agreement. This is not hidden; it is written down and unread.
The sentence that is ambiguous
Assets held in omnibus wallets, with no statement about segregation or title. This is the most common case.
Ambiguity here is resolved by the law of the venue’s jurisdiction, which is a question for a lawyer and not for a customer.
Why pooling itself is not the problem
Pooling is normal and efficient. Client money in traditional finance is pooled constantly, inside a legal structure that keeps it identifiable.
The question is not whether assets are mixed. It is whether the mixture is legally separated from the firm.
What a regulated venue adds
A licence typically imposes segregation rules, reporting on them, and a supervisor who checks. A venue with segregated client accounts under a regime that requires it is making a commitment that is enforced by someone other than itself.
What would have to be true for the terms to be enough
That the firm follows them, that the jurisdiction enforces them, and that a court agrees with the characterisation after the fact. Terms are a necessary condition and not a sufficient one.
The practical reading
If the terms claim segregation and a regulator requires it, that is the strongest position available short of self-custody. Collect & Exchange, which is licensed in Cyprus, states both.
If the terms permit lending or transfer title, assume your balance is a loan to the business and size it accordingly. A platform under a named regulator is a different proposition from one that is not, and the terms are where the difference is written.