Wednesday September 30 2020

News Source: Fund Regulation

Focus: General - Fund Regulation

Type: General

Country: UK

On 30th September 2020, the Financial Conduct Authority (FCA) published a statement for firms providing portfolio management services or holding retail client accounts that include positions in leveraged financial instruments or contingent liability transactions. It outlines a further 6-month extension and amendments to a temporary coronavirus (Covid-19) measure the FCA issued in March.

The original measure on 10% depreciation notifications took effect from Tuesday 31 March 2020 to Wednesday 30 September 2020. The FCA wrote to firms serving retail investors about this.

The FCA are extending the previous flexibility with some amendments. the FCA won’t take action for breach of COBS 16A.4.3 EU for services offered to retail investors from Thursday 1 October 2020 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

Firms must still pay due regards to the interests of their customers and treat them fairly (Principle 6), and pay due regard to the information needs of their clients, and communicate information to them in a way which is clear, fair and not misleading (Principle 7). If the FCA have concerns that potential serious misconduct may cause (or have caused) significant harm to consumers, then the FCA will consider the appropriate response, which may include opening an investigation.

The FCA is also amending our 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 6 months (to 30 March 2021).

Click on the link for further information.