Since March 2020 we have adopted temporary measures on the requirement for firms to issue 10% depreciation notifications to investors (COBS 16A.4.3 UK).
The obligation to inform the client of 10% declines in the value of their portfolios no longer applies to professional clients following an amendment to Article 62 of the UK version of the MiFID delegated regulation. This change was made in regulation 3(10) of Statutory Instrument 774/2021 which came into effect on 26 July 2021.
The measures were put in place initially to help firms support consumers during market volatility linked to Covid-19 and the Brexit transitional period. We said we would show supervisory flexibility to firms’ ongoing compliance with the requirement so long as certain criteria were met.
In March 2021 we announced[1] that we would maintain the temporary measures while Her Majesty’s Treasury (HMT) carried out policy work on the future of the requirement as part of its Wholesale Markets Review (WMR). Findings from the WMR have indicated support for removing or amending the requirement. We are therefore extending the temporary measures for firms for a further 12 months (until 31 December 2022) whilst HMT and/or FCA policy work on the requirement’s future is concluded.
During this period, we won’t take action for breach of COBS 16A.4.3 UK for services offered to retail investors provided that the firm has:
- issued at least one notification in the current reporting period, indicating to retail clients that their portfolio or position has decreased in value by at least 10%
- informed these clients that they may not receive similar notifications should their portfolio or position values further decrease by 10% in the current reporting period
- referred these clients to non-personalised communications, perhaps made available on public channels, that outline general updates on market conditions (these could contextualise potential drops in portfolio or position value to help consumers meet their objectives, rather than making impulse decisions about their investments) and
- reminded clients how to check their portfolio value, and how to get in touch with the firm
Firms must still pay due regards to the interests of their customers and treat them fairly (Principle 6), pay due regard to the information needs of their clients, and communicate information to them in a way which is clear, fair and not misleading (Principle 7).
If we have concerns that potential serious misconduct may cause (or has caused) significant harm to consumers, then we will consider the appropriate response, which may include opening an investigation.