Investing term

What is Protection cap?

The maximum amount the investor-protection scheme will reimburse per client per broker failure.

A protection cap is the maximum the investor-protection scheme will reimburse per client if a regulated broker fails — money above the cap isn't covered. Knowing the cap matters if you hold large balances: spreading assets across more than one covered institution can keep more of your money inside the protected limit.

For example

If the scheme caps protection at $250,000 and you hold $600,000 at one broker, $350,000 sits outside the safety net — a reason to spread it out.

Protection cap is taught hands-on in Stage 9 — Fees, Scams & Protecting Your Money.

See the lesson →

Related terms

ChargebackA consumer protection on credit-card transactions that lets you reverse fraudulent charges.Fee dragThe cumulative effect of every fee you pay on the return you actually keep.FX markupThe gap between the true (mid-market) exchange rate and the rate your broker gives you.Inactivity feeA fee charged if you don't trade enough times per year.
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