What if Freetrade goes bust?

It’s a fair question. If a broker fails, customers usually want to know two things: (1) what happens to their cash and investments, and (2) how long it might take to get them back.

‘Going bust’ usually means insolvency and an administrator. If Freetrade became insolvent, an appointed insolvency practitioner would manage the process under UK insolvency law and the FCA’s client assets regime (CASS).

In a failure, it’s common for normal operations to be disrupted. Depending on the situation, you might see trading restricted or paused; deposits and withdrawals slowed or paused while positions and records are reconciled; and formal communications from the administrator with next steps.

Does ‘going bust’ mean I lose my money?

Client money and custody assets are meant to be segregated from the firm, so they are not treated as the firm’s own property when creditors are paid.

If the firm fails, the administrator needs to match what’s held externally (at banks/custodians) to what the firm’s records say each customer is entitled to.

Client money is held in segregated client money bank accounts and is subject to the FCA’s client money distribution rules.

What if there’s a shortfall in client assets during insolvency?

In an ideal world, segregation means customers receive back what they’re entitled to. But if there is a shortfall at the moment of insolvency, clients would share that shortfall pro rata based on their entitlement and any remaining eligible loss may then fall to FSCS. Potential causes can include operational error, timing differences, record mismatches, or third-party issues.

What happens to my investments (shares, ETFs, etc.)?

In an insolvency, the administrator’s job is to reconcile records and arrange the transfer of custody assets to another provider. 

How would I find out something was wrong?

While this is a highly unlikely scenario, one of the key protections Freetrade maintains is a solvent wind-down plan (sometimes called a ‘living will’). This plan is designed to be triggered if certain financial thresholds are approached, for example, if Freetrade gets close to running out of money.

If those triggers are hit, the wind-down plan would start, the regulator would be notified, and Freetrade would likely stop onboarding new customers. The focus would then be to transfer existing customers to another provider as quickly as possible, rather than waiting for an insolvency process.

Separately, a bad external audit opinion on Freetrade’s client asset controls would also be a serious warning sign. Freetrade has never had that outcome before, but it would indicate that controls and processes were not meeting the required standard.

It’s worth putting ‘sudden failure’ into context. A business like Freetrade is subject to ongoing regulatory requirements, governance, and monitoring, which are designed to reduce the chance of a firm failing suddenly and unexpectedly. In most scenarios, if something starts to go wrong, there are steps and triggers intended to manage it earlier.

Would customers be informed of breaches?

Freetrade is not automatically required to notify customers every time a rule is breached. However, Freetrade is required to explain the key risks in how it holds your money and investments. This is set out in Freetrade’s terms and conditions.