RTS 27 reports & 10% depreciation notifications - Thistle Initiatives

Written by Thistle Initiatives - Compliance consultancy | Mar 25, 2021 12:00:00 AM

What is happening?

The FCA is, from March 2021, putting in place temporary measures with respect to RTS 27 reports (reports submitted by trading venues on execution quality) and 10% depreciation notifications (by portfolio managers) while it consults on changes to these requirements later this Spring. These temporary measures will be in place until the end of 2021.

What do you need to do?

The FCA is currently preparing a consultation covering the RTS 27 reporting obligation with a view to abolishing it, given concerns that have been expressed around the value these reports bring to the market and to consumers and the burdens involved in producing them. In view of the consultation, the FCA has announced that it will not take action against firms that do not produce RTS 27 reports for the rest of 2021. The regulator expects that by end of 2021 it will have concluded a policy consideration of the future of these reports.

For the last twelve months, the FCA has adopted temporary coronavirus measures on the requirement for portfolio management firms to issue 10% depreciation notifications to investors (required by COBS 16A.4.3 UK). These measures were originally put in place to help firms support consumers during periods of actual/potential market volatility linked to the spread of Covid-19 and the Brexit transitional period.

A period of supervisory flexibility on firms’ ongoing compliance with the requirement was granted so long as certain criteria were met. This period of flexibility has provided the opportunity to consider the effectiveness of the 10% depreciation notification requirement, and the FCA intends to consult on changes to the requirement later this Spring. It is therefore extending the temporary measures for firms until the end of 2021 while undertaking policy work on the future of the requirement. During this period, it will take no action for a breach of COBS 16A.4.3 UK for services offered to retail investors 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.

For services offered to professional investors, the FCA will not take action for a breach of COBS 16A.4.3 UK provided that firms have allowed professional clients to opt-in to receive notifications.

How can we help you?

If you’d like to know more about how we can help you with any aspect of your execution or portfolio management arrangements, or any other regulatory compliance issues, our expert team is here to help.

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