Last Saturday morning, I was going through my emails from the blog, and then: “Oh no, what did I say in the blog, have I messed up?!?”
I’d just received a notification from the MP forum where the participants had again raised the question about SIPC protection through Interactive Brokers UK, after having received some confusing responses to say the least from IB support…
My heart skipped a beat.
What investor protection is there for a Swiss account with Interactive Brokers UK?
What if my Interactive Brokers account in Switzerland, as a Swiss client, were not under SIPC protection (Securities Investor Protection Corporation) but instead covered by the UK’s Financial Services Compensation Scheme (FSCS)?
For newcomers, that would mean that if IBKR went bust, my assets would only be protected up to:
- If SIPC (US entity): USD 500'000 (~425kCHF)
- If FSCS (UK entity): GBP 85'000 (~95kCHF)
On one hand, I was concerned about my own Interactive Brokers investment accounts, but above all, I was worried that I’d given wrong information to the readers of my blog…
Wait, Interactive Brokers UK for a Swiss investor?
Interactive Brokers exists throughout the world. IBKR enables you to invest in the stock market. It’s the best one for Swiss investors, even though Interactive Broker is not based in Switzerland. For the whole European region, their business entity is located in the United Kingdom (UK).
When you open an Interactive Brokers account in Switzerland, you therefore have an account with the Interactive Brokers UK entity (and not Interactive Brokers US).
IBKR: FSCS or SIPC protection?
So straight away, I got in touch with my contact person at Interactive Brokers to ask them:
As Swiss clients get their account through Interactive Brokers UK, I need some clarification on this subject: are we under the protection of American SIPC (USD 500'000), or the British entity FSCS (GBP 85'000)?
And I added:
PS: IB support mentioned both responses depending on whether you speak to the support team in English or German… which is not very reassuring!
A few days later, I received this response:
“The stocks of all IBUK accounts are covered by the US SIPC protection. This includes the accounts domiciled in the United Kingdom and Switzerland under IBUK.”
And she added: “If these accounts have a separate UKL segment (segment regulated by Interactive Brokers UK which holds products such as CFDs, physical metals and certain futures and index options based in the European Union), this UK segment is protected separately by the FSCS up to GBP 85'000.”
When checking this on the internet, I came across a Reddit article which referred to a page on the IB UK website explaining: “Forex CFDs, like other CFDs, are carried by IB UK and therefore if you have an IB LLC account, you will be prompted to open an IB UK segment. The IB UK segment will have your current account number followed by the suffix F.”
Which clearly means: when you open an IBKR account via the website interactivebrokers.co.uk, you get a trading account with IBKR LLC, which is protected by the SIPC (up to USD 500'000).
However, if you trade in CFDs or gold that you buy on European markets, then the Interactive Brokers website will ask you to open an IB UK account (which will end in “-F”). Therefore, you will be aware if you have an IB UK segment/account :)
Conclusion
After quite some worry, I’m now reassured.
All my investments in US and Swiss ETFs via my Interactive Brokers UK account are indeed protected by the SIPC up to USD 500'000. And the same goes for you :)
If you want to go into the subject of why I chose IB, you can read my complete Interactive Brokers guide for beginners here.
FAQ
What’s your recommendation the moment the IB account exceeds USD 500'000?
One could imagine creating a second IB account. But it doesn’t work like that, because the SIPC would consider it as the same “capacity”. This SIPC article explains the concept well.
Alternatives I can think of:
- Two individual accounts per member of the couple (2x 500kUSD)
- A joint account (500kUSD)
- A corporate account (additional 500kUSD), if you have a business, of course
