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14 April, 2020 | by Steve Martin - Senior Solutions Consultant, Contemi Solutions

Beyond the headlines: FCA scraps mifid 10% letter rule

You may have read the headline that the MiFID II regulation around 10% drop has been scrapped and assumed you can take a rest but not all is as it seems.

As Steve Martin, Senior Solutions Consultant at Contemi says, today, more than ever, we need to read beyond the headlines and double check our facts before taking action. As has been demonstrated with the spread of unresearched information around COVID 19, this can have dangerous consequences.

Steve goes on to say that the news headline and story was circulated and would lead people to believe the regulation had been scrapped however I went to the FCA site to check the facts and here is what you should be focusing on:

Supervisory flexibility over 10% depreciation notifications until the end of September

Firms providing portfolio management services or holding retail client accounts that include leveraged investments are currently required to inform investors where the value of their portfolio or leveraged position falls by 10% or more compared with its value in their last periodic statement, and for each subsequent 10% fall in value. Firms have raised concerns about the impact on consumers and the operational burden of this in a highly volatile market.

The FCA said, ‘We have no intention of taking enforcement action where a firm:

  • has issued at least one notification to a retail client within a current reporting period, indicating their portfolio has decreased in value by at least 10%; and
  • subsequently provides general updates through its website, other public channels (such as social media) and/or generic, non-personalised client communications. These communications should update clients on market conditions, explain how clients can check their portfolio value and invite clients to contact the firm if they wish; or
  • chooses to cease providing 10% depreciation reports for any professional clients. We will adopt this approach for a period of 6 months (to 1 October 2020).

So our conclusion is that the regulation is most definitely not “scrapped”, but you don’t have to produce a notification for each subsequent 10% fall in value (i.e. if drops by 20%/30% etc.) in a reporting period. Our other conclusion is to read beyond headlines & research from trusted sources which does not include ‘Dave on Facebook’ who seems to know more than the Chief Medical Officer about COVID-19.

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