Disclaimer: the protections mentioned in this article do not cover investment performance. It’s important to always remember that markets may go up or down, so you should never invest more than you can afford to lose.
Trusting us with your investments is not something we take for granted. Any funds that you deposit into your Shares account are kept in a secure account called an E-money account. This E-money account is safeguarded by our partner Modulr, an authorised E-money Institution (EMI). This means that if we or Modulr were ever to become insolvent (i.e. bankrupt), funds that you have deposited with Modulr are protected against the claims made by any creditor.
How is an E-money Institution (EMI) different from a bank?
The main difference between an EMI and a bank is that banks lend out clients’ money, whereas EMIs are prohibited from lending money.
Banks take deposits from customers to lend money out and make money on the difference, whereas an EMI holds 100% of clients’ funds at all times and makes its money on the volume of payments and accounts.
How are my funds kept safe?
Any funds that you deposit into your Shares account are kept in a secure E-money account, which are kept safe using something called safeguarding.
Safeguarding means that our partner Modulr ensures that 100% of the funds they receive are segregated from all other funds that they hold and they can’t be used for any other purposes.
Furthermore, Modulr must also hold an additional 2% of the total value of safeguarded client funds in their own funds, which are held separately. The purpose of the funds is to ensure that, in the case of any business issues, there are enough funds to support an orderly business wind-down and the process of returning of client funds held back to clients.
Do UK users benefit from Financial Services Compensation Scheme (FSCS) protection?
Because Modulr is an EMI, not a bank, they don’t put clients’ money at risk by lending it out. Therefore protection schemes like the Financial Services Compensation Scheme (FSCS), which offers consumer protection up to £85,000 (or £170,000 for a joint account) in the event of a bank failure, do not apply to their business model.
Am I covered by the Securities Investor Protection Corporation (SIPC) protection in the US?
Your US securities are held with our partner Alpaca, who is FINRA regulated and a registered member of the SIPC. This means your US securities are protected up to the value of $500,000 should Alpaca fail. You can read more about this directly on the SIPC website.