Keeping client money and safe custody assets protected

David Lumer

September 6, 2021

David Lumer

How we protect your money and investments.

We recognise we’re the new kids on the block, and it’s not unreasonable to ask why you should trust us with your hard-earned cash.

I’m here to set your minds at ease and explain the safeguards we use to protect your money and investments.

Our controls and processes

The first lines of defence are the daily controls and processes.

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These include (but are not limited to):

  • Daily cash and stock reconciliations between our records and the bank or custodian
  • Performing due diligence over all our third party suppliers which are used to hold client money or assets
  • Confirming that all trades are acknowledged and matched with the other side the day before settlement
  • Ensuring we have the correct legal agreements in place with our banks and custodians confirming that your assets do not belong to Freetrade

FCA’s CASS rules

We hold all of your money and assets under the FCA’s CASS rules, which means they are held in segregated accounts, separate from the company’s money.

For each of our deposit banks and custodians we have a legally binding letter acknowledging that your assets do not belong to us, and cannot be used in the unlikely event of us entering administration to cover any debts we may have.

We maintain detailed records of who all the cash and stocks we hold belong to, so in the event of something going wrong with us, these can be identified and distributed to you as the owner.

The audit

In addition to our own controls, we are subject to an annual audit. This covers both our financial performance, the long term sustainability of the business and our controls over client money and assets.

We have engaged Deloitte, one of the Big Four accountancy firms, to perform this audit. 

We aren’t required to go with such a prestigious audit firm, and few startups would, but we felt that it is such an important aspect of our business that we must. 

We expect them to really challenge us, which is exactly what we want because we recognise the critical importance of our client asset arrangements and of the transparency to our customers that their audit opinion provides. 

Into Europe

As we expand into Europe, we’ve been putting in place the protections needed for your money and securities to meet or exceed UK and European legislative requirements.

We are carefully selecting banks and custodians that are highly regulated market leaders in the jurisdictions in which they operate.

We will continue to exercise all due skill and care and, where we can, go above and beyond our regulatory commitments to give you that added peace of mind.

Financial services compensation scheme (“FSCS”)

In the unlikely event of our bankruptcy, our clients’ assets are protected in a few ways. 

Firstly, our client asset arrangements mean that any client assets should not be available for administrators to cover Freetrade’s outstanding debts. 

And as a regulated UK financial business, all deposits and investments with us are covered by the Financial Services Compensation Scheme (“FSCS”).

The FSCS can award up to £85,000 in compensation to any one investor where they decide that an investment business is in default and is unable to satisfy any claims against it. You can find out full details on the FSCS by visiting their website here.

You can contact them on 020 7741 4100 or 0800 678 1100 or write to them at FSCS, 10th Floor, Beaufort House, 15 St Botolph Street, London EC3A 7QU.

Just remember that FSCS compensation would not cover any losses in the market value of your assets. 

Hopefully this article has given you confidence that we’re on it when it comes to protecting your cash and stock. It’s crucial to us that we do the right thing by our customers, and keeping you safe is the minimum. 

As we grow we’ll continue to enhance our controls, and strive to automate where it’s best to. 

We are building the best investing experience for you, with a control framework to match it.

Important Information

When you invest, your capital is at risk. The value of your portfolio can go down as well as up and you may get back less than you invest. Past performance is not a reliable indicator of future results.

Freetrade is a trading name of Freetrade Limited, which is a member firm of the London Stock Exchange and is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales (no. 09797821).

The views expressed above are those of community members and do not reflect the views of Freetrade. It is not investment advice and we always encourage you to do your own research.

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