What the account is
A brokerage account sits between you and the markets. You deposit cash, instruct the broker to buy, and the broker arranges execution and settlement. The account records what you own, what cash is available, and what has happened historically.
It is not a deposit account. Money held in it is generally not a deposit, earns on different terms, and falls under a different protection regime — where one applies at all. The distinction surfaces when a firm runs into difficulty, which is the worst moment to learn it.
Common account types
| Type | Characteristics |
|---|---|
| General investment account | No special tax treatment and no contribution limit. Gains and income are taxable in the year they arise, according to local rules. |
| Tax-advantaged account | Names and rules vary by country. Usually offers relief or shelter in exchange for contribution limits and restricted access. The rules are jurisdiction-specific and they change. |
| Retirement account | Built for long-term saving, often with employer involvement, and with access restricted until a qualifying age. |
| Cash account | Buys with settled cash only. Simple, and it cannot go negative. |
| Margin account | The broker lends against your holdings so you can buy beyond your cash. It magnifies losses as well as gains, and can force sales at the worst time. |
Borrowing to invest means a fall can leave you owing more than you put in. If the collateral drops in value, the broker can issue a margin call and is generally entitled to sell your holdings at its own discretion, without waiting for your instruction.
Custody and ownership
Custody is the arrangement under which your assets are held. It is the part of a brokerage relationship to understand before you deposit anything.
- Nominee / street name. The broker or its custodian holds the securities on your behalf, with you as beneficial owner. This is the usual arrangement and it makes settlement efficient. Your entitlement rests on the broker's records being accurate and properly segregated.
- Direct registration. The securities are registered in your own name with the issuer's registrar. Slower to trade, but your ownership does not depend on the broker's books.
- Segregation. Client assets should be held apart from the firm's own, out of reach of its creditors if it fails. Whether that is required, and how it is audited, depends on the regulator.
- Sub-custodians. Foreign holdings often sit behind a chain of custodians in other jurisdictions, each a link whose local insolvency rules may apply.
What it can hold
| Asset class | What it is |
|---|---|
| Shares (equities) | Part ownership of a company. Value rests on the company's prospects and on what others will pay. May pay dividends; may pay nothing. |
| Bonds | A loan to a government or company that pays interest and returns principal at maturity. Prices move inversely to interest rates, and the issuer can default. |
| Funds and ETFs | A pooled holding of many underlying assets, so a single purchase buys diversification. An index fund tracks a published index; an ETF trades on an exchange through the day. |
| Cash | The uninvested balance awaiting instruction. How it is held, and whether it earns interest, varies by broker and is worth checking. |
| Digital assets | Where offered, these commonly sit outside the regulatory and protection regimes covering securities. Custody arrangements differ widely and are often weaker. |
Brand marks identify the instruments listed. They do not indicate a partnership, listing, trading venue or endorsement.
The cash side
Every brokerage account carries a cash balance, and several practical questions sit with it.
- Settled and unsettled cash
Sale proceeds are not settled on the spot. Buying with unsettled proceeds is restricted in cash accounts, and breaching the rule can bring trading restrictions.
- Where idle cash sits
Some brokers sweep it into an interest-bearing arrangement; others do not. On a large uninvested balance that is a real cost, and worth asking about.
- Currency
Buying an asset priced in another currency means a conversion, usually with a spread or a fee. Exchange-rate movement then affects your return alongside the asset itself.
- Withdrawals
Taking money out needs settled cash, so a sale must complete first. Selling to meet a deadline means building the settlement period into the timing.
Documents it produces
- Trade confirmations — issued after each execution, recording quantity, price, fees and the time of execution.
- Periodic statements — holdings, valuations and activity over a period.
- Tax documents — summaries of income and disposals, on a schedule set by the relevant tax authority.
- Cost basis records — what you paid, which sets the taxable gain on sale. Keep them. Reconstructing a cost basis years later, after transfers and corporate actions, is hard work.
- Corporate action notices — dividends, splits, mergers and rights issues, some requiring a response by a deadline.
What protection covers
Investor protection schemes exist in many jurisdictions, and they are misunderstood in a consistent direction: people read them as cover against loss.
These schemes help recover assets when a firm fails or cannot return what it held. They do not compensate you because an investment fell in value. A share that drops sharply is an investment outcome, and no scheme anywhere covers it.
What to check about a scheme before you rely on it
Coverage is specific, and the scheme itself publishes the specifics — not the firm pointing at it.
- Which scheme, and in which country. Coverage follows the entity you contract with. An account opened with a group's overseas subsidiary may sit under a different scheme from the one the parent advertises.
- The limit and how it is counted. Per client per firm is usual, so two accounts at the same firm normally share one ceiling rather than each holding its own.
- What counts as a covered asset. Cash awaiting investment, securities held in nominee name and digital assets are often treated very differently.
- Who the custodian is. Named in the account agreement, and worth reading beside whatever that agreement says about segregation of client assets.
Fees belong in the same exercise. The commission schedule, the platform or custody charge and any currency conversion spread all sit in the firm's published pricing. Read them together — the combined drag is what you actually pay.
Frequently asked questions
What does holding shares in nominee name mean?
The broker or its custodian is the registered holder and you are the beneficial owner. It makes trading and settlement efficient, and it means your entitlement depends on the broker's records and on client assets being properly segregated.
Does an investor protection scheme mean I cannot lose money?
No. These schemes address the failure of the firm, not the performance of your investments. Market losses are not covered.
Why do the brand marks appear on the asset list?
To identify which instrument each row illustrates. They do not indicate any relationship with those companies, and none exists.
