10% Portfolio Drop Rule – dropped!

As part of the Government’s reforms of previous EU legislation, next on the list is the proposal to scrap the 10% portfolio drop rule, which was introduced within MiFID II rules in January 2018.


Under the legislation firms were required to notify clients where the overall value of their portfolio had fallen by 10% or more over a reporting period (usually quarterly). The requirement was that the notification was performed by the end of the business day where drop had occurred (effectively within 24 hours), plus any subsequent 10% falls over the same period.

In anticipation of Covid related market volatility, the FCA had previously relaxed and further extended the rule on several occasions, most recently in December 2021.

An Explanatory Note issued by the Government states that: Regulation 2(4) removes obligations for investment firms providing portfolio management services to a retail client to inform the client when the overall value of the portfolio depreciates (Article 62 of the Commission Delegated Regulation).

A full impact assessment has not been produced for this instrument as no, or no significant, impact on the private, voluntary or public sector is foreseen.

Formal announcement of the scrapping of the rule is awaited, but this is widely anticipated to be the start of a broad culling of the EU related rules. It will be interesting to see what goes next …

Important Note: ATEB news is intended to provide general information ONLY. The content, including any views expressed or guidance provided, does not replace the need to comply fully with FCA Rules and Guidance. Unless you have discussed news article content with ATEB, and specifically how it relates to your circumstances, then ATEB disclaims all liability and responsibility and actions arising from any reliance placed upon it. For the avoidance of doubt therefore, any reliance you place on such information without our consultation is at your own risk.

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Our View

Probably a positive move. The rule had already been relaxed so this latest step merely brings things (almost) to a conclusion. There is a little a firm can do when markets fall suddenly and the need to inform clients of a 10% drop so urgently placed firms under a lot of pressure and could also cause panic for clients.

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About the Author

Paul has in-depth experience across a wide spectrum, having headed up compliance, T&C, monitoring, oversight and MLRO functions previously. He was also an IFA for some time so can see things from more than one angle.

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