Indemnity Clause

An indemnity clause runs in the opposite direction to the limitation of liability that usually precedes it: instead of capping what the firm pays the client, it sets out what the client agrees to reimburse the firm. The scope is typically claims, losses, taxes, duties and enforcement costs the firm incurs in connection with the account, and it commonly extends to legal costs, sometimes on a full-recovery basis rather than the reduced basis a court would otherwise allow. The reason it belongs in the same reading as the margin clauses is that it is one of the routes by which a client can owe money beyond what the account holds. Where a retail account carries negative balance protection, that protection is defined in terms of trading losses; an indemnity is not a trading loss, so the two do not necessarily overlap. Worth checking is whether the indemnity is limited to matters arising from the client's own breach or negligence, or is drafted to cover anything connected with the account at all — the difference between a proportionate clause and an open one.