Segregated client cash can still earn the broker: UK rules separate safekeeping from interest

A broker can safeguard customer cash as client money and still earn revenue from the banks holding it. Segregation answers who owns the principal and how it should be protected if the broker fails. It does not, by itself, give the customer every pound of interest generated by that principal. Since 25 September 2026, the Financial Conduct Authority’s rule states the distinction directly: a firm must pay retail clients interest earned on their client money unless it has notified them otherwise in writing and retaining some or all of the interest is compatible with the Consumer Duty.[1][2]

CMC Markets’ 2026 annual report shows the commercial scale that client balances can reach. The group recorded £23.392 million of income on client funds while reporting £1.1491 billion of segregated client money at year end. Those two figures cannot be divided into a reliable yield because one is annual revenue and the other a closing balance, and because the group disclosure spans products and entities. They nevertheless demonstrate that safeguarded customer money can support a material revenue line without becoming the broker’s balance-sheet asset.[4][5]

Safekeeping and economic entitlement are separate questions

Under CASS, client money is placed in accounts identified separately from the firm’s own money and supported by records, reconciliation and trust arrangements. The purpose is to prevent the principal from being available to the firm’s general creditors. The interest rule then decides who is contractually entitled to the return generated while the money is held. A firm may pay all, some or none of the interest, but for retail business a decision not to pay must be notified in writing and must satisfy the Consumer Duty’s outcome-focused standard.[1][2]

The 2026 rule adds a substantive fair-value test

Before the September amendment, CASS already required written notification where a firm did not pay a retail client the interest earned. The new wording adds that non-payment of some or all interest must be compatible with the Consumer Duty. Written disclosure is therefore necessary but not sufficient. A term saying “we keep the interest” cannot, by itself, answer whether the product provides fair value, supports customer understanding and avoids foreseeable harm.[1]

The FCA had already signalled the economic concern in December 2023 after surveying 42 investment platforms and self-invested personal pension operators. It said most retained some interest, that the amount retained might not reasonably reflect the cost of managing cash and that many also charged customers for holding the same cash. The regulator described that combination as “double dipping” and told firms to stop it. The 2026 CASS wording places the Consumer Duty test directly inside the client-money interest rule for retail clients.[1][3]

Firm-owned interest should not remain mixed with client money

The 2026 segregation rules address the plumbing after the contract assigns interest to the firm. Where a firm expects bank interest belonging entirely to it to arrive in a client bank account, it must ask the bank in writing to pay that interest into a separate firm account. If the bank cannot or does not follow the request, the firm must remove the interest from the client account promptly and no later than one business day after receipt. The rule prevents firm money from sitting unnecessarily inside a protected client pool.[2]

That mechanism reveals the sequence. First, the client agreement and Consumer Duty determine whether interest can belong to the firm. Second, bank instructions and CASS segregation rules determine where the firm-owned amount should be paid. Third, the broker recognises revenue under its accounting policies. A customer can have full ownership of the principal while the broker owns the agreed interest after it becomes due. Neither ownership displaces the other.[1][2]

CMC’s £23.4m cannot be reverse-engineered into a customer spread

CMC’s annual report gives the revenue but not the matched average interest-bearing base, bank rates, customer payments or currency mix. The closing £1.1491 billion segregated balance rose 65.4% from the prior year, while income on client funds fell 4.8%. That divergence could reflect later inflows, falling rates, product and currency mix, customer interest payments, professional arrangements or other group exposures. It does not prove that the broker’s retained margin widened or narrowed.[4][5]

A simple division of £23.392 million by £1.1491 billion gives about 2.04%, but labelling that as the broker’s yield would be wrong. The denominator is a single year-end observation rather than a time-weighted average, and the numerator may not map exclusively to that disclosed pool. Publishing the arithmetic as a return would make incompatible periods and entity boundaries look comparable. The correct result of the calculation is a warning about missing data, not a yield.[4]

The group figure also cannot be used to allege that CMC withheld £23.392 million from UK retail customers. “Income on client funds” may include multiple entities, account types, currencies and commercial arrangements. CMC’s UK page explains segregation and named banks, but it does not reconcile the group revenue line to each retail agreement. A finding about legal possibility and material economics must stop short of assigning the whole amount to one customer class.[4][5]

A disclosed retention can still fail the customer-outcomes test

The Consumer Duty question is proportionate value. A firm incurs treasury, reconciliation, safeguarding, technology, audit and bank-management costs. Retaining some interest can compensate those costs and support a low headline platform fee. But the justification weakens if the retained spread grows far beyond reasonable cost, customers receive little information, or the firm separately charges a cash custody fee. The FCA’s 2023 intervention shows that contractual permission does not end the analysis.[1][3]

A fair-value assessment would compare the gross rate earned, the rate passed to customers, operating costs attributable to cash management, other fees charged on cash and the benefit of the overall product. It would also consider whether customers can move uninvested money easily and whether the rate is explained in a way they can understand. None of those tests requires the firm to pay exactly the central-bank policy rate. They require the retained amount to be defensible.[1][3]

What a complete disclosure would look like

For each product and legal entity, a broker could publish the average client-cash balance, gross interest and fee income, customer interest paid, average retained spread, bank and maturity mix, cash custody fees and the contractual clause assigning interest. A reconciliation to the financial statements would let readers distinguish group revenue from UK retail economics. It would also prevent a high closing balance from being mistaken for the average denominator.[1][2][4][5]

Customers should check the current terms rather than assume that “segregated” means “interest-bearing for me.” They should also distinguish a stated customer rate from the gross amount earned by the broker and note whether the rate is variable, tiered or conditional. If the terms are silent, the FCA rule starts from payment to the retail client. If the terms permit retention, the Consumer Duty still applies.[1]

The finding and the limit

Nothing in the cited evidence shows CMC breached CASS or the Consumer Duty. The annual report transparently records income on client funds, and the regulatory page describes its segregation process. The investigation establishes a mechanism and a scale: client money can remain customer property while its interest becomes broker revenue under disclosed, fair-value-compatible terms. It does not establish how much of CMC’s £23.392 million came from any named customer group.[1][2][4][5]

The most useful test is therefore two-part. Ask first whether the principal is safeguarded. Ask separately who receives the return generated while it is safeguarded, and why. A broker can pass the first test while keeping some interest; from September 2026, UK retail firms must also be able to show that the second outcome is compatible with their duty to customers.[1][2][3]

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