On 19 March 2021, the FCA issued an update regarding the temporary measures it is putting in place for RTS 27 reports and 10% depreciation notifications whilst it consults on changes to these requirements later this Spring. The temporary measures will be in place until the end of 2021.
In terms of RTS 27 reports the FCA states:
- The next set of RTS 27 reports on execution quality will be based on pre-Brexit data which means that the information in them is likely to be of limited use for market participants and may even be misleading. There is also a challenge arising from the EU’s two-year suspension of RTS 27 reports for firms in the temporary permissions regime.
- The FCA is currently preparing a consultation looking at the RTS 27 reporting obligation, with a view to abolishing it, given concerns that have been expressed around the value of these reports.
- The FCA will not take action against firms who do not produce RTS 27 reports for the rest of 2021. The FCA expects that by the end of 2021 it will have concluded its policy consideration of the future of these reports.
In terms of 10% depreciation notifications the FCA states:
- For the last 12 months the FCA has adopted temporary COVID-19 measures on the requirement for firms to issue 10% depreciation notifications to investors (COBS 16A.4.3 UK).
- 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 it undertakes policy work on the future of the requirement.
- During this period, the FCA will not take action for breach of COBS 16.A.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
- Firms must still pay due regard 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).
- For services offered to professional investors, the FCA will not take action for breach of COBS 16A.4.3 UK provided that firms have allowed professional clients to opt-in to receiving notifications.