Article by Phil
The Financial Conduct Authority (FCA) has announced (21/12/21) that its 10% depreciation notification exemption is to be extended until 31st December 2022.
This “exemption” first came into force back in March 2020 on the back of the pandemics effect on the financial markets.
Basically, under a complicated piece of European legislation called Mifid II, firms had to write to clients if the value of their portfolios fell by 10% or more in any given quarter and again for any further falls of more than 10%. The legislation came in a few years ago and it was generally felt that it was aimed more at volatile and less regulated European markets than the UK market, but we had to adopt it being part of the EU at the time. However, when the pandemic hit, markets did fall, and many client’s investment portfolios did fall by more than 10%. This meant that huge numbers of letters had to be sent out by Providers (at their expense).
The FCA then intervened on the basis that the pandemic was unpredictable, and markets could continue to be affected through no real fault of their own. It was also considered prudent because clients were becoming unduly concerned by falls in investment value leading to some potential making poor and harmful decisions about their investments. The “exemption” was extended again in October 2020 and again now, for a further 12 months.
Independent Financial Adviser firms are required to continue to advise clients about their portfolios and let them know how to access valuations. In our cases either through our online portal or even over the telephone. In any event all clients continue to receive annual reviews as a minimum and in many cases half yearly or even quarterly reviews, which keep them up to date.
By extending the “exemption” for another 12 months the FCA has potentially bought itself time to consider whether to drop this reporting requirement altogether. After all, now that we are outside the EU there is no need to necessarily follow all their rules, especially those which perhaps don’t benefit UK clients.
