Segregated Client Ledger

A segregated client ledger is the internal record a firm keeps of how much it owes each of its clients from money held in segregated accounts, that is, accounts kept apart from the firm's own funds. Payment institutions, e-money issuers, investment firms, brokers, crypto platforms and law firms all hold client money in pooled bank accounts; the ledger is what shows which part of the pool belongs to whom.

The ledger is the record-keeping side of segregation of funds. The bank accounts themselves, such as a client money account or safeguarding account, show only a total balance. If a firm fails, administrators rely on the segregated client ledger to work out each client's claim, so regulators require it to be accurate, complete and reconciled frequently. Related rules are described under safeguarding and client money.

Imagine a holiday club where members pay in a little each week and the organiser keeps all the money in one locked tin, separate from his own wallet. The tin shows how much is there in total, but only his notebook shows how much each member has paid in and taken out.

A segregated client ledger is that notebook for a financial firm. The separate tin protects members if the organiser runs into debt; the notebook makes sure each member gets back exactly what is theirs.

• Client balances. A running balance for each client, built from every receipt, payment, fee and adjustment.
• Account mapping. Which segregated bank accounts, at which banks and in which currencies, hold the corresponding funds.
• Transactions in flight. Amounts received but not yet allocated, or paid out but not yet settled, which must be tracked so the totals match.
• Audit trail. Links from each entry to source records, so that balances can be traced and verified.

The ledger is usually a subledger of the firm's main books, whose total must equal the firm's liability to clients.

Two checks are central. An internal reconciliation compares the total of all client balances in the ledger with the amount the firm's records say it holds in segregated accounts. An external reconciliation compares the firm's records with the bank statements of those accounts. Any shortfall must normally be topped up from the firm's own money straight away, and any excess belonging to the firm must be withdrawn so that client and firm money are not mixed. Frequent, documented reconciliation is the main way regulators test whether segregation is real.

In the United Kingdom, investment firms follow the Financial Conduct Authority's client assets (CASS) rules, which require daily internal client money reconciliations and regular external reconciliations. Payment and e-money firms have long had to safeguard customer funds, and the FCA introduced a more detailed safeguarding regime, due to take effect in May 2026, requiring daily reconciliations, monthly reporting and annual audits. In the European Union, payment and e-money firms safeguard funds under the payment services and e-money directives, and investment firms follow client asset rules under MiFID II. In the United States, broker-dealers must keep customer cash in a special reserve bank account under the SEC's customer protection rule, and futures commission merchants must segregate customer funds under Commodity Futures Trading Commission rules.

Several collapses have shown what happens when ledgers and segregation fail. When the futures broker MF Global failed in 2011, customer accounts were found to be short of roughly 1.6 billion dollars because segregated funds had been used for the firm's own needs. The 2022 collapse of the crypto exchange FTX revealed customer money mixed with the firm's own, a form of commingling. Failures of smaller UK payment and e-money firms have left administrators spending years reconstructing records before returning money. In each case the lesson was similar: segregation on paper is not enough if the ledger is incomplete, reconciliations are skipped or exceptions are ignored.

Modern platforms build the client ledger on double-entry principles with immutable entries, separate client and firm accounts within the same system, and automated daily matching against bank data. Many firms hold client money across several banks and in an omnibus account structure, so the ledger must handle multiple currencies and banks while still producing a single, clear claim for each client. UK investment firms that hold client money must also keep a "resolution pack" under the CASS rules: a set of documents and records, including the client ledger, that an insolvency practitioner could use to identify and return client money quickly. Building the ledger with that end use in mind, rather than only for daily operations, is regarded as good practice across the industry.

• Financial Conduct Authority