- Home
- News
FCA extends 10% drop rule
The Financial Conduct Authority (FCA) has extended its flexibility around firms’ requirement to send 10% drop notifications to retail investors for another six months.
The FCA first relaxed the obligation from 01 April 2020 when markets saw considerable volatility due to global Coronavirus pandemic lockdowns.
Under the 10% drop rule, investment firms have to notify their clients when their portfolio value drops by 10%. They have to issue a new notification at multiples at 10%. Notifications must be sent no later than the end of the business day during which the 10% threshold is exceeded.
The regulator will not take any action for a breach of the rule provided that the firm has issued at least one notification in the current reporting period, has informed clients that they may not receive similar notifications on a further drop, has referred these clients to general communications that update on market conditions, and has reminded clients how to check their portfolio value and how to contact the firm.
The regulator said they are also extending the flexibility for professional investors.
The extension will end on 30 March 2021.
The Personal Finance Society, the Chartered Financial Planner professional body, backed the FCA’s decision earlier this year to defer its rule obliging advisers to send 10% drop letters to clients when their investments fall by 10% or more.
The PFS said it was the first body to call for a temporary suspension of the MiFID II rules that require advisers to write to clients when their investments drop by more than 10%.