FCA further extends flexibility on 10% drop reporting requirement for portfolio management firms

This post was written by Ciara Davies

The FCA published a statement on 30th September announcing a further six-month extension to the temporary COVID-19 measure issued in March, allowing supervisory flexibility over 10% depreciation notifications.

The statement is directed to firms that provide portfolio management services or hold retail client accounts that include positions in leveraged financial instruments or contingent liability transactions.

The FCA will not take enforcement action for a breach of COBS 16A.4.3 EU 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%; 
• 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.

The FCA continues to remind firms of their obligation to act in accordance with Principles 6 and 7 of its Principles for Business. 

The FCA is amending its extension of the previous flexibility regarding professional investors.  For services offered to professional investors, from Thursday 1 October 2020 the FCA 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.

The FCA will adopt this approach for six months, to 30 March 2021.