MiFID 10% Depreciation Rule: The End of the FCA’s Flexible Approach is Nigh

September 29, 2020 by Andrew Poole, Martin Lovick

**Update subsequently announced** please read our latest blog on this subject to learn about the FCA's extension to 30 March 2021.

When the UK eased its way into what is now starting to look like the first lockdown of 2020, the FCA announced a raft of measures aimed at easing the regulatory burden on firms struggling with the effects of the COVID-19 pandemic. One of these measures was to introduce forbearance on the 10% portfolio depreciation notifications required under MiFID II for a six-month period.

Announced via a “Dear CEO” letter on 31st March to firms that provide services to retail clients, this flexible approach required managers to only issue one notification within a reporting period provided they continued to give general market updates to their clients. The FCA also stated that firms could stop providing these depreciation reports for any professional clients.

The end of the six-month period is now fast approaching and, barring any last-minute announcement from the FCA, the obligation to report 10% depreciation will be effective again from 1st October 2020.

As a reminder, the rule requires portfolio managers to inform clients of any depreciation of portfolio assets greater than 10% during the relevant reporting period by the end of the following business day. It also requires reporting of any subsequent fall of 10% or greater within the same period, each reporting period to be not less than quarterly.

Along with the end to this flexible approach the FCA is also phasing out the relief for deadlines in respect of the filing of fund accounts. Even as social distancing and work from home restrictions are being re-imposed in the UK, the FCA is returning to business as usual.
For further information on this alert, please speak to Andrew Poole, Martin Lovick or contact your usual ACA consultant at +44 (0)20 7042 0500.

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