The Financial Conduct Authority’s (FCA) decision to both extend the relaxation of the 10% depreciation notice requirement for firms until the end of 2021, and consult on a permanent change to the rule, has been welcomed by Pimfa.
At the start of the covid pandemic last year, the trade association for the wealth management, investment services and investment and financial advice industry, flagged concerns with the FCA about the 10% rule and its impact on member firms and their clients.
For the last 12 months, the FCA has adopted temporary covid measures on the requirement for firms to issue 10% depreciation notifications to investors. This was done to help firms support consumers during periods of market volatility that were linked to the both the spread of covid-19 and the Brexit transitional period.
“This period of flexibility has given us the opportunity to consider the effectiveness of the 10% depreciation notification requirement,” the FCA said in a statement last week.
“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.”
‘Certainty’
Responding to this announcement, Tim Fassam, director of government relations and policy at Pimfa, said it will bring much needed certainty to many firms in the current economic climate.
“The UK’s departure from the European Union meanwhile gives us, as an industry, and the FCA the chance to fully engage on the regulatory regime in Britain and to discard some rules which firms may consider cumbersome or unnecessary,” he added.
“It is right that the regulator examines whether certain current rules are necessary for a competitive and well-functioning UK wealth management industry.”
During the period, the regulator said it will not take any actions for breaches of the 10% rule, provided the firm has met a number of conditions.
In addition to issuing at least one notification of a 10% drop in the current reporting period, they must also inform clients they may not receive similar notifications should their portfolio further decrease by 10%.
Firms must also refer clients to non-personalised communications that outline general updates on market conditions and, lastly, they must remind clients how to check their portfolio value, and how to get in touch with the firm.
