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Tech issue triggers 10% drop alerts for 1,200 Quilter clients

Quilter Investors’ CEO Steven Levin called on the government to scrap the ‘illogical’ rule last year

Outgoing FCA chair warns on cryptocurrency and Brexit

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A technical error on Friday morning saw 1,200 Quilter customers mistakenly notified that the value of their investments had fallen by more than 10%.

A spokesperson confirmed to Portfolio Adviser that the issue was fixed that same day and the customers affected account for less than 0.3% of platform users.

Quilter said: “A technical issue triggered 10% drop notification emails to a number of customers on Friday morning. This was identified the same morning and we’ve communicated with affected customers and advisers to confirm they were sent in error and can be ignored.

“We’re sorry for any concern this caused.”

‘Gov’t woken up to the illogical 10% drop rule’

The depreciation rule hasn’t been without its fair share of critics, with some arguing that the alerts trigger undue panic and could result in investors selling out at the bottom of the market and locking in losses.

One such detractor has been Steven Levin, chief executive of Quilter’s platform and Quilter Investors.

In July 2021, when the government said it was considering dropping the rule, he applauded the move.

“It’s been a long time coming, but it seems the government has finally woken up to the illogical 10% drop rule and will consult on scrapping it for retail clients. The fact the rule has been ‘paused’ for so long now shows that it really wasn’t working, and removing it for retail clients along with professional clients would be a victory for common sense regulation,” Levin said.

The sooner it’s gone the better

Following Friday’s email notification, Aisa Group chief executive James Pearcy Caldwell told International Adviser: “The marked volatility of shares and portfolios over the last three years has constantly shown the EU-imposed 10% drop notifications to be a bureaucratic process that largely is seen as having no value by clients, whilst being an administrative nightmare for companies.

“Did anyone think what the consequence of sending a ‘drop’ notice would be to 50-5000 clients at the same time, or indeed what was meant to happen next? Largely the answer is nothing, especially when all Mifid clients now receive annual notifications of charges, performances with forecasts separately which they can discuss.

“The faster it is abolished in the UK the better,” Pearcy-Caldwell added.

Rule to remain on ice until the end of the year

The 10% rule was introduced in 2018 as part of the European Union’s Mifid II regulation and requires discretionary investment managers notify clients when the value of their portfolio, as evaluated at the beginning of each reporting period, drops by 10% and thereafter in multiples of 10%.

It was relaxed in March 2020 after global markets were shaken as Covid restrictions saw companies batten down the hatches.

Initially in place for six months, the depreciation rule will remain on ice until 31 December 2022.

On 21 January this year, the FCA confirmed that the “obligation to inform the client of 10% declines in the value of their portfolios no longer applies to professional clients”.

The watchdog’s wholesale markets review indicated that there is support for removing or further amending the rule.

The article first appeared on our sister title Portfolio Adviser.

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