Tier-one versus offshore licences: where your money goes and who protects it

A broker appears to you as one unified brand, but the contract you sign is with a specific legal entity holding a specific licence. That entity, not the brand name or the look of the website, determines the protection you actually receive.

The four substantive differences **Client money segregation.** Major regulators require firms to hold client funds in bank accounts separate from company funds, with periodic audits of that separation. In several offshore jurisdictions the requirement is weaker or the auditing less frequent.

**Leverage caps and negative balance protection.** Regulatory frameworks in the EU, the UK and Australia cap retail leverage and require protection against a balance going negative. Offshore entities often offer far higher leverage without those limits, which increases potential losses to exactly the same degree it increases potential gains.

**Compensation schemes.** Some frameworks tie the licence to a compensation fund that covers clients up to a set limit if the firm cannot meet its obligations. That safety net is absent from most offshore licences.

**Complaint routes.** Having an independent body that receives a client complaint and issues a decision binding on the firm is fundamentally different from relying on the broker's own internal complaints desk.

Why brokers run multiple entities Operating several entities is legitimate and common. A firm obtains a local licence in each market it wants to serve, and clients are routed to the appropriate entity based on their country of residence. The problem is not the structure itself, but that many traders do not know which entity actually serves them.

How to identify your entity - Read the client agreement and look for the full legal company name, licence number and country of registration, not the trading brand. - Search that licence number in the official public register on the regulator's own site, not on the broker's. - Confirm the licence status is active and that the permitted scope of business covers the service you intend to use. - Check the website footer: many brokers state there which entity serves which region.

The real trade-off Higher leverage and looser conditions at offshore entities come with less protection when something goes wrong. That trade-off should be a deliberate, informed choice, not the result of not reading carefully during signup.

At BrokerMatch For every broker we list the registered legal entities and the regulators governing them, sourced only from official records. Where we have no documented source for a given data point, we leave it marked as not published rather than estimating an unverified value.