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One free scan finds every outdated or missing driver and matches the right update for your exact hardware.Free scan · exact hardware matchAn exchange protection fund is a legal compensation scheme whose coverage depends on the country and the specific fund. Some schemes may compensate eligible customers when a covered brokerage or intermediary fails and cannot return certain customer assets. They generally do not insure investments against falling prices or an issuer’s default. “Exchange protection fund” is therefore not one universal policy: check the rules for the jurisdiction and intermediary holding your account.
What an exchange protection fund is designed to do
These funds address a particular custody or intermediary-failure risk, not the ordinary risks of investing. The law and rules for each scheme define the triggering event, eligible customers, covered assets and transactions, exclusions, limits, and claims process.
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Asset segregation and compensation are separate safeguards. In Japan, securities firms must keep customer assets separate from their own. If that segregation works, assets should ordinarily be returned even if the firm fails; the Investor Protection Fund is a backstop for qualifying assets that cannot be returned in the specified failure situation. Japan Investor Protection Fund (JIPF) Q&A
What losses it generally does not cover
A fund of this kind should not be treated as insurance against a bad investment. JIPF expressly excludes losses from market-price declines, an issuer’s failure to pay interest or principal, and a securities firm’s false or misleading explanation. Its calculation concerns the eligible asset’s value under its rules, not the difference between what the investor paid and that value. JIPF Q&A
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Coverage can also exclude products or transactions outside the scheme’s scope. JIPF lists exclusions including foreign-exchange transactions, over-the-counter derivatives, derivatives traded on overseas securities exchanges, certain exchange currency-related transactions, and some Type II Financial Instruments Business products. Eligibility can depend on the customer, the regulated business, and the transaction—not simply on whether the customer has an account at a member firm. JIPF Q&A
How two schemes differ
Japan and Hong Kong illustrate why the local rules matter; neither example defines a global standard.
| Scheme | Described trigger and scope | Limit or qualification stated in the cited overview |
|---|---|---|
| Japan Investor Protection Fund (JIPF) | When a member securities firm becomes insolvent and qualifying customer cash or securities cannot be returned. The Q&A lists eligible examples including shares, public and corporate bonds, investment trusts, certain margin-trading deposits, and specified clearing margins for eligible domestic exchange-traded derivatives. Some customers, including professional investors, and some transactions are excluded. | Up to ¥10 million per customer for eligible unreturned cash and securities. For listed securities, JIPF says it uses the closing price on the day it publicly announces compensation; amounts the customer owes the failed firm are deducted. The reviewed Q&A does not state a date for this limit. JIPF Q&A |
| Hong Kong Investor Compensation Fund | The Investor Compensation Company says it compensates investors of any nationality for pecuniary losses resulting from default of a licensed intermediary or authorized financial institution in relation to exchange-traded products in Hong Kong. Its overview includes certain Shanghai or Shenzhen exchange securities routed through northbound Stock Connect for defaults on or after 1 January 2020. | The cited introduction does not state a compensation limit or all eligibility, calculation, and claims details. The Investor Compensation Company is identified as the recognized administrator that receives, determines, and pays claims. Investor Compensation Fund introduction |
How the Japan limit works—and what it does not mean
JIPF’s stated maximum is up to ¥10 million per customer for eligible assets that cannot be returned; it is not a general limit for funds elsewhere. Compensation is paid in cash, including when the missing asset was a security. A customer may retain a claim against the failed firm for an amount above the compensation limit, but recovery through insolvency proceedings depends on the firm’s remaining assets. JIPF Q&A
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How to check whether your account is covered
- Identify the jurisdiction and fund. Find the official scheme that applies to the account’s legal entity and country; do not assume the exchange’s name alone determines protection.
- Verify the intermediary. Check whether the firm and the specific legal entity holding your account are members, licensed, or otherwise within the scheme’s rules.
- Match your customer status and activity. Look for rules on retail or general customers versus professional investors, and whether your product, transaction, and market are included.
- Read exclusions and the calculation rules. Check which failure triggers claims, how assets are valued, what debts may be deducted, and whether market or issuer losses are excluded.
- Confirm the current cap and claim procedure. Find the applicable limit, how it is counted, who determines a qualifying default, when claims open, and any filing deadline. Do not apply Japan’s limit to a different fund.
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