The regulator has been told to clarify Mifid II reporting requirements after market activity over Christmas could have caused panic among investors.
Over the Christmas holidays Philip Milton, who runs PJ Milton and Co, an advice firm in Devon, had the experience of having to inform clients their portfolios had dropped 10 per cent.
Mifid II requires investors must be told if the value of their portfolios plummets by 10 per cent.
Mr Milton said he struggles to see what benefit it was to the client of them having to be told their portfolios were down 10 per cent just as they were looking forward to tucking into their Turkey.
Mr Milton said: "The process is complicated – it is not just a single account but their aggregate portfolio of accounts of course, in itself an interesting calculation to have to make.
"Then you deduct withdrawals made, income paid-away, add-back dividends and interest received, account for any new subscriptions and then compare with the previous published valuation.
"All we managed to do – even if our letter was generic and saying don't panic, was to give them reasons to wonder why we had sent them a letter."
Mr Milton said market movements in the run-up to Christmas caused his company massive headaches.
He said: "Christmas Eve, a half-day, was the primary culprit based on the previous close's valuations.
"We close at midday so when must the letters go out? This was the (day of the) whopping fall in the Dow only matched the next day with the biggest ever points' recovery.
"We provide advice but how many people would simply be triggered to 'panic sell' because they have had a letter – and is that really in their best interests?"
Ben Hammond, principal consultant at Altus, said many platforms take it as their responsibility to notify the end client of a 10 per cent reduction in the value of their portfolios, because that way, they know they are complying with Mifid II rules.
But Mr Hammond said that means the end client just gets a notification saying the portfolio has dropped 10 per cent, without any context, and that could cause the client to panic.
He said: "Then it becomes the advisers problem.
"There isn't a right way or a wrong way for the platform to act, it comes down to how each platform wishes to do it, some tell the client and the adviser, and some tell just the client.
"There is no clarity from the rules about how this should be done."
When asked would the FCA clarify how adviser and platforms should notify clients of a 10 per cent drop in the value of their portfolios, a spokesman for the regulator declined to comment.
The regulator's guidance makes clear that a client must be informed of the 10 per cent drop on the next business day after it happens, even if on the next business day the market rises by the same amount or more than the previous day's fall.