Freedom Finance as a broker: what the terms say and what the SEC says
Data and contract terms as of 24.09.2026 (General Terms of Business dated 01.07.2026; FRHC filings for the fiscal year to 31.03.2026).
Verdict: usable, with limits. The broker holds an EU licence and its parent files with the SEC. But the broker's own terms allow it to hold client securities in accounts in the company's name, with custodians outside the EU, and to use them in financing transactions. On top of that, in March 2026 the SEC told the group and its founder that staff intend to recommend a civil action. Workable for unleveraged listed securities; not a place to park a large balance.
What it is
This note covers Freedom Finance Europe Ltd (brand: Freedom24): Cyprus, CySEC licence CIF 275/15, EU-passported under MiFID II. The parent is Freedom Holding Corp. (NASDAQ: FRHC) — nominally headquartered in New York, with most of the business in Kazakhstan — controlled by founder and CEO Timur Turlov. The group's other brokers (Kazakhstan, US) are separate entities with different protection and are not covered here.
Sources: General Terms of Business, 01.07.2026 · FRHC 10-K for the year to 31.03.2026
Findings
1. SEC staff have made a preliminary decision to recommend action against the group and its founder
On 11.03.2026 Freedom Holding and Timur Turlov received a Wells Notice: SEC staff reached a preliminary determination to recommend a civil action for violations of federal securities laws. The investigation has run since 2021 and covers settlement practices and relationships with institutional market makers at the group's non-US brokers, accounting for intra-group transactions in US securities, disclosure and internal controls. A Wells Notice is not a charge, and the company is contesting it. Separately, the 10-K (01.06.2026) disclosed OFAC inquiries into transactions involving sanctioned persons, including the use of certain clearing arrangements.
Sources: Bloomberg, 02.06.2026 · Kursiv, 03.06.2026 · Willkie Compliance Concourse (OFAC)
2. The broker's own terms give it wide rights over client assets
What the General Terms of Business (01.07.2026) say, in short:
- §34.2: assets may be registered in the name of the custodian or the company; they may then not be segregated from company assets and may be less protected against claims by the company's creditors.
- §34.3: the custodian may sit outside the EEA, in which case the client's rights are governed by that jurisdiction's law.
- §34.5: securities are pooled in an omnibus account; if a custodian defaults, clients share the shortfall pro rata.
- §34.17: the company may use client instruments in securities financing transactions, for its own account or another client's. §18.6 requires the client's "express consent" — the text does not make clear how the two clauses fit together.
- §19.1: a client who does not object to the list of third-party custodians accepts all the risk. The list itself is provided only on request.
- §31.4: for clients classified as Professional, full ownership of funds transfers to the company. That client's cash becomes an unsecured claim on the broker rather than client property.
The Investor Compensation Fund (ICF) covers up to €20,000 per client (§28.1).
Source: Freedom Finance Europe, General Terms of Business, 01.07.2026, sections 18, 19, 28, 31, 34 (read 24.09.2026).
3. Track record of allegations: Hindenburg 2023 vs. a review the company commissioned itself
In August 2023 Hindenburg Research, short the stock, accused the group of sanctions evasion, inflated revenue and commingling client funds. In October 2023 CNBC reported DOJ and SEC interest. In January 2024 an external review commissioned by the independent directors (Morgan Lewis, Forensic Risk Alliance) concluded the allegations were not supported by evidence. That review was company-commissioned; the SEC did not close its investigation and reached the Wells stage in 2026. In July 2023 CySEC settled with Freedom Finance Europe for €50,000 over possible AML breaches.
Sources: Hindenburg Research, 15.08.2023 · CNBC, 06.10.2023 · FRHC, 25.01.2024 · CySEC decision
4. The group is growing, but the capital cushion is thin
Equity stood at $1,489.3m on 31.03.2026, up from $1,224.6m a year earlier. Net income for the year was $153.3m (vs. $76.2m). Total assets are $13.2bn, so equity is roughly 11% of assets — a modest buffer for a group that includes a bank and an insurer. Since 2021 Freedom Finance Europe has been a direct Euroclear participant, so it can hold part of its securities at the EU central securities depository without an intermediary.
Sources: FRHC, FY2026 results · TradingView, 10-K summary · Business Wire, 11.10.2021
What could go wrong
| Event | What is lost | How likely |
|---|---|---|
| SEC files suit; counterparties and banks cut ties with the group | account access while transferring out; possible restrictions on US securities | real: the Wells Notice is out and the probe is in its fifth year |
| Broker or custodian insolvency while securities sit in the company's name or outside the EEA | pro-rata share of any shortfall (§34.5); ICF covers up to €20,000 | low, but the only protection here is the clause, not the group's balance sheet |
| Broker failure while the client is classified as Professional | all cash becomes an unsecured claim (§31.4) | Professional clients only |
| OFAC scrutiny reaches the group's clearing arrangements | frozen settlement, delayed withdrawals | unknown: the inquiries are disclosed, their subject is not |
What we don't know
- The list of third parties holding Freedom Finance Europe client securities (§19.1), in particular who holds US equities: Euroclear, the group's US broker, or someone outside the EEA. The broker provides it on written request.
- A given client's classification (Retail or Professional) — visible in the client portal or the categorisation letter. It decides whether cash stays client property.
- The full 10-K text could not be retrieved automatically; the investigation section comes from two independent outlets quoting it. We have not read the auditor's opinion on internal controls.
- Whether the SEC will sue, and on what counts — nobody knows yet.
What limits the risk for a client
For any client of this broker, four general limits do most of the work:
- Retail classification keeps cash as client property; under Professional it transfers to the broker's ownership (§31.4).
- Listed securities without leverage, securities lending or credit carry the least exposure to the clauses above.
- Free cash above the ICF cover (€20,000) is effectively a claim on the broker.
- Clients can request the §19.1 custodian list in writing; equities or funds held with a non-EEA custodian or in the company's name warrant a closer look.
What would flip the verdict to "no" (any one is enough): the SEC sues FRHC or Turlov · CySEC suspends or revokes CIF 275/15 · OFAC sanctions or fines a group entity · FRHC's auditor disclaims or qualifies its opinion · the broker's terms change to make the custodian list unavailable to clients.
What to watch
FRHC's quarterly report for the period to 30.09.2026: the status of the SEC matter and group equity. Forecast made on 24.09.2026: group equity will be no lower than $1.4bn (base: $1,489.3m at 31.03.2026 and $153.3m of net income over the year). Whether the SEC sues is an event, not a forecast — and it sits on the list of things that change the verdict.
Broker terms change; this note quotes the version dated 01.07.2026. It looks at the broker as a place to hold assets.
Research for information only. Not investment advice.