Protection of funds on a brokerage account — deposit guarantee is not the same thing

Definition

This explainer separates three different mechanisms that are easy to confuse when looking at an investment account: (1) protection of cash, (2) protection of securities, (3) the deposit guarantee. This distinction is the core of honest risk information — and is often omitted in other comparisons.

What it means in practice

• Cash at a Polish brokerage house → the KDPW compensation scheme, NOT the deposit guarantee. The Central Securities Depository runs a compensation scheme: 100% up to the equivalent of EUR 3,000 + 90% of the excess, with a maximum payout of about EUR 20,100 (assets covered up to EUR 22,000). That is far less than the EUR 100,000 deposit guarantee (BFG), which works for cash at a bank — because a brokerage house is not a bank.
• Cash at a broker that is a bank → the deposit guarantee. If the broker holds a banking licence (e.g. a foreign brokerage bank), free cash may be covered by its country's deposit guarantee fund up to EUR 100,000. That is why our comparison separates "Cash protection" depending on whether the institution is a bank.
• Securities (shares, ETFs, bonds) → segregation, outside the insolvency estate. Instruments you buy are recorded in your name and held in a segregated register / depository (in Poland: KDPW) — they remain yours even if the broker fails. They are additionally covered by the compensation scheme (up to the limit) in case of misappropriation.

Why it affects your choice

The phrase "your funds are protected" means something different for cash, for securities, and when the broker is a bank. Confusing this is a real trap — that is why the investing comparison shows two separate rows: "Cash protection" and "Instrument protection", each with a source.

How to check this in our comparison

The "Identity and trust" section in the Investing modal — the rows "Cash protection" and "Instrument (securities) protection".

Watch out

Limits and structure depend on the jurisdiction and the entity (a Polish brokerage house, a bank, a foreign broker — different compensation schemes). If cash sits on a linked bank account (e.g. eMakler-type services), it may fall under the BFG — confirm the account structure with the broker. Protection against failure/misappropriation is not the same as protection against market loss — the value of your investment can fall regardless of these mechanisms.

We do not give investment advice. Investing involves the risk of losing capital, regardless of compensation schemes. Confirm the protection structure of your account with the broker. WTP Finance is for information only.