DEFINITION of 'Segregation'

Segregation is the separation of an individual or group of individuals from a larger group, often in order to apply special treatment to the separated individual or group. Segregation can also involve the separation of items from a larger group, as seen with the handling of funds in certain types of accounts.

Segregation applied to the securities industry, for example, requires that customer assets being held by a broker or other financial institution be kept separate – or segregated – from the broker or financial institution's assets. This is referred to as security segregation.

BREAKING DOWN 'Segregation'

Segregated accounts usually have different privileges and requirements than those held by the general public. Portfolio managers will often create portfolio models which will be applied to the majority of the assets under management. However, some discretionary accounts may be introduced for investors with requirements or risk aversion deviating from the behavior of typical individuals.

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