This statement is for firms providing portfolio management services or holding retail client accounts that include positions in leveraged financial instruments or contingent liability transactions. It outlines a further 6-month extension and amendments to a temporary coronavirus (Covid-19) measure we issued in March.
Update: 21 December 2021
We have published a statement[1] announcing that the temporary measures for firms have been extended for a further 12 months whilst HMT and/or FCA policy work on the requirement’s future is concluded.
The original measure on 10% depreciation notifications took effect from Tuesday 31 March 2020 to Wednesday 30 September 2020. We wrote to firms[2] serving retail investors about this.
We are extending the previous flexibility with some amendments. We won’t take action for breach of COBS 16A.4.3 EU for services offered to retail investors from Thursday 1 October 2020 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), and 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 have caused) significant harm to consumers, then we will consider the appropriate response, which may include opening an investigation.
We are also amending our extension of the previous flexibility regarding professional investors. For services offered to professional investors, from Thursday 1 October 2020 we will not take action for breach of COBS 16A.4.3 EU provided that firms have allowed professional clients to opt-in to receiving notifications.
We will adopt this approach for 6 months (to 30 March 2021).
In light of potential market volatility arising from the continued spread of Covid-19 and the end of the Brexit transitional period, we believe that consumers still face many difficult choices about their investments. We have previously issued guidance for the messages firms can give customers on both pensions[3], and investments and life assurance[4]. We believe the flexibility offered in this statement will further help firms to support consumers in these uncertain times.