The FCA has announced a review of the 10% depreciation notifications requirement. This requirement came into being with MiFIDII in January 2018 and is intended to ensure that investors are kept informed in periods of extreme market volatility.

The volatility in markets as a result of the pandemic in 2020 created a need for multiple notifications and many commentators noted that these appeared to be creating more anxiety than clarity for investors in addition to creating a substantial additional workload for firms. As a result, the FCA adopted temporary coronavirus (Covid-19) measures on the requirement for firms to issue 10% depreciation notifications to investors under COBS 16A.4.3, primarily applying greater supervisory flexibility on firms’ ongoing compliance with the requirement so long as certain criteria were met.

The FCA has now announced …

“This period of flexibility has given us the opportunity to consider the effectiveness of the 10% depreciation notification requirement. We intend to consult on changes to the requirement later this Spring. We are therefore extending the temporary measures for firms until the end of 2021 while we undertake policy work on the future of the requirement.

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”