The FCA is permanently axing the 10% portfolio drop notification rule across its handbook as part of a shake-up of MiFID investment rules.

The controversial rule required financial advisers to write to clients every time their portfolio dropped by 10% or more to explain what was happening.

In 2020 the FCA temporarily paused the full implementation of the rule during the Covid outbreak to reduce the burden on firms.

The rule drew consistent criticism from advisers that it created unnecessary admin and was unsettling investors.

In Policy Paper PS25/13: The MiFID Organisational Regulation, published this week by the FCA, the regulator says it will keep the “substance” of most of the MiFID rules post Brexit but will merge the requirements into its FCA Handbook and Conduct of Business rules.

However two significant changes will be made, it said, including the 10% depreciation rule being dropped permanently. The FCA will also make electronic communication the “default” mode of contact with investment clients.

The MiFID (Markets in Financial Instruments Directive) rules and its successor, MiFID II, were devised by the European Union (EU) to improve investor protection. They provide a regulatory framework that governs financial markets and investment services. The aim was to safeguard investors, promote market transparency and integrity and create a 'unified EU financial market.' They have been under scrutiny by the FCA post Brexit.

In its latest update the FCA says: “We are removing the requirement to report a 10% drop in portfolio value to a retail client from Conduct of Business Sourcebook (COBS) 16A.4.3UK so it no longer applies as a rule to optional exempt (Article 3) firms, in line with MiFID firms.

Article 3 firms are mostly UK financial adviser firms subject to a less onerous set of MiFID rules.

The rule changes affect a variety of firms including:

• MiFID investment firms including credit institutions and collective portfolio management investment firms
• MiFID optional exemption ‘Article 3’ firms
• Third country firms
• Undertakings for Collective Investment in Transferable Securities (UCITS) managers
• Residual Collective Investment Scheme (CIS) operators and small authorised UK
• Alternative Investment Fund Managers (AIFMs)
• Occupational Pension Scheme (OPS) firms
• Recognised investment exchanges (RIEs)

The FCA said it was keeping the 'substance' of the MiFID Org Reg requirements the same. 

The new rules will come into force on the 23 October. The changes to the 'durable medium' definition will come into force 3 months after publication of the final rules on 12 January 2026.

The consultation follows the Treasury’s policy paper on its next steps for reforming the UK’s MiFID framework, published as part of announcements made by the Chancellor around the November 2024 Mansion House speech.

• https://fca.org.uk/publication/policy/ps25-13.pdf

• https://www.fca.org.uk/publication/consultation/cp24-11.pdf