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Regulatory Rules Need To Change With The Times

These are turbulent times. We note with interest – and approval – the comments from some distinguished operatives in the equity markets. There’s a clamour in some quarter for a complete change of attitude on behalf of the regulatory authorities, who have already suspended a controversial rule more fitted to times of low volatility in equity and bond markets.

The suspended rule requires wealth managers, under Mifid II legislation, to report a 10 per cent drop in portfolios within 24 hours. It has been shelved until October because of market volatility on the back of the Covid-19 pandemic.

The Financial Conduct Authority took the decision suspended the rule at the beginning of April. Leading players in equities, such as Paul Killik, founder of wealth management company Killik & Co., wants the suspension to be indefinite.

Killik argues that the rule should be cast aside because it can cause panic among investors during times of high volatility.

Below, we reproduce an excerpt from Killik’s interview in his company’s quarterly magazine:

“To date, nobody has been able to explain to me the sense or logic behind this rule, which merely serves to create more fear in the minds of already anxious retail investors.

“One of our most important duties as financial advisers is to try to help clients overcome their natural urge to panic in rapidly falling markets. Yet, as one client is reputed to have said “’if you want me to stop panicking then stop sending me these letters’.

“Whilst it is encouraging that the FCA has granted firms a temporary suspension in 2020, this self-evidently crazy requirement serves no public purpose and should be fully withdrawn at the earliest opportunity.”

  • We agree. In volatile equity markets, an arbitrary 10 per cent reporting rule can serve no helpful purpose. In the less volatile debt market, the fallout is yet to come. Lenders may well be nervous, but it’s up to platform lenders such as Money&Co. to work closely with borrowers and stop loans going bad. We’re pleased with a low bad debt rate of 0.03 per cent over five and a half years and over £23 million facilitated. We intend to protect and improve that record.


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Disclaimer: Money&Co.™ is the trading name of Denmark Square Limited, Company Number 08561817, registered in England & Wales, authorised and regulated by the Financial Conduct Authority (FCA). The company is identified on the Financial Services Register under Reference Number 727325. The registered office is 58 Glentham Road, Barnes, London, SW13 9JJ where the register of Directors may be inspected. Denmark Square Limited (ISA manager reference number Z1932) manages the Money&Co. Innovative Finance ISA.