Financial Services Regulation
Contents
- Legislation
- Public Offers and Admissions to Trading Regulations 2024
- Payment Services
- Cryptoassets
- Consumer Credit: Buy-Now-Pay-Later (BNPL)
- Consumer Credit: Consumer Credit Act Reform
- Consumer Credit: Motor Finance
- Consumer Credit: Regulated Home Finance
- Code of Conduct (COCON) and Senior Managers & Certification Regime (SM&CR)
- Insurance: Premium Finance
- Insurance: Captives and Alternative Risk Transfer
- Packaged Retail and Insurance-based Investment Products (PRIIPs) and the Consumer Composite Investments (CCI) Regime
- Tokenisation of Funds
- Alternative Investment Fund Managers Directive (AIFMD)
- Advice Guidance Boundary
- Sustainability and ESG
- Consumer redress reforms
Key contact
Sushil Kuner
Partner & Head of Financial Services Regulation
Key anticipated events
January
- POATR Regime: Public Offers and Admissions to Trading Regulations 2024 fully in force (19 Jan)
- Consumer Credit Act Reform: Phase 2 Consultation expected early Q1 (scope, definitions, key rights)
- Mortgage Charter: Firms begin decommissioning reporting following FCA announcement
- Systemic Stablecoins: Deadline for responses to Bank of England consultation (10 Feb)
- Advice/Guidance Review: Authorisation gateway opens
- Crypto: Responses to CP25/40–42 due 20 March
- Motor Finance: Final redress rules expected
- AIFMD: Draft SI removing ‘small registered’ threshold
- Premium Finance: FCA Final Report (MS24/2)
- VRPs: First commercial VRPs go live
- Stablecoins: FCA rules for qualifying issuers expected
- BNPL: FCA Policy Statement and Final Rules due
- Payment Services Contracts: New termination rules come into force (28 Apr)
- CCI Regime: Consumer Composite Investments Regulations 2024 in force (6 Apr). Transition to Product Summaries runs to June 2027
- Payments Safeguarding: New supplementary safeguarding regime starts (7 May)
- BNPL: Temporary Permissions registration window opens (15 May)
- Motor Finance: Pause on handling discretionary commission complaints ends (31 May)
- SM&CR Reform (Phase 1): Final FCA/PRA rules expected (mid‑2026)
- Consumer Credit Promotions: FCA review of CONC 3 rules begins (H1)
- Captive Insurance: Draft rules consultation expected (Summer 2026)
- AIFMD Reform (Rules): FCA consultation on new three‑tier regime (H1)
- Fund Tokenisation: FCA Policy Statement and final rules expected (H1)
- BNPL Regulation: New Deferred Payment Credit regime takes effect (15 July)
- Non‑Financial Misconduct: COCON changes come into force for all FCA‑authorised firms (1 Sep)
- Cryptoassets: Final FCA rules and guidance expected (Q3)
- Crypto Authorisation Gateway: Applications for full FSMA authorisation open (1 Oct)
- APP Fraud Review: PSR review of the reimbursement policy (including 50:50 split) (Oct 2026)
- FOS Case Fees: Consultation expected on differentiated fee pricing
- Crypto Regime: Market Abuse and Conduct of Business rules come into force
- ESG Ratings: FCA consultation on new regulatory regime continues
- FOS Reform: Treasury consultation on the 10‑year "longstop" for complaints
- National Payments Vision: Work begins on moving PSR functions into the FCA
January
2026
February
2026
March
2026
April
2026
May
2026
June
2026
July
2026
September
2026
October
2026
November
2026
December
2026
Throughout
2026
Legislation
Public Offers and Admissions to Trading Regulations 2024
For more information on this topic, please read our article in the Corporate section here.
Payment services
New rules governing the termination of payment service contracts come into force in April 2026. Banks, Payment and E-Money Institutions will face stricter requirements on the notice periods and reasons they must provide when closing customer accounts, to better protect consumers from ‘de-banking’ and unclear closures, allowing them more time to find alternatives and complain.
Shortly after, in May, the ‘supplementary’ regime for payments safeguarding takes effect, requiring non-bank payment service providers to bolster their protection of customer funds. The FCA’s safeguarding rules for payment services protect consumer funds by requiring firms to segregate them from their own funds, either in separate accounts or via insurance/guarantees, preventing loss if a firm fails. The new rules mandate stricter daily reconciliations, annual audits, monthly reporting and better wind-down planning, aiming to align payment safeguarding more closely with investment firm standards (CASS rules) and enhance customer protection.
The mandatory reimbursement regime for Authorised Push Payment (APP) fraud formally began in October 2024, requiring Payment Service Providers (PSPs) to refund victims up to £85,000 within five working days for most eligible scams via Faster Payments or CHAPS. Liability for reimbursing victims of fraud is split equally between the sending and receiving PSP, with exceptions for consumer gross negligence unless the consumer is vulnerable. There will be a review of the effectiveness of this policy in October 2026. Firms should ensure their data on reimbursement rates and consumer standard of caution decisions is spotless ahead of this scrutiny.
Crucially, 2026 will also be a year of innovation in payments. HM Treasury is expected to introduce legislation in 2026 that will grant the FCA new powers to set open banking rules, and the FCA has already confirmed it will oversee the launch of Variable Recurring Payments (VRPs). VRPs are an open banking technology that allows users to securely authorise trusted third parties to manage recurring transactions. This is a strategic move to give consumers more control over regular payments and drive competition against traditional direct debits.
This is in the context of the National Payments Vision, which sets out the Government’s ambitions to achieve a trusted, world-leading payments ecosystem delivered on next generation technology, where consumers and businesses have a choice of payment methods to meet their needs.
We also expect to see major structural changes as part of the Government’s wider plan to reduce regulatory burden on businesses and drive economic growth in the UK. The Government intends to abolish the Payment Systems Regulator (PSR) and consolidate its functions into the FCA to streamline the regulatory landscape.
The FCA will also press on with its regime for UK-issued, fiat-backed stablecoins, with specific rules set to be introduced towards the end of Q1 2026, and the launch of a stablecoin-specific cohort in the Regulatory Sandbox, designed to allow firms to test use cases that can drive real economic efficiency.
Actions for businesses to consider
Firms must prepare for the new regulated activity of ‘issuing qualifying stablecoins’. This regime captures cryptoassets that aim to maintain a stable value by referencing one or more fiat currencies. Stablecoins have the potential to drive efficiency in payments and settlement using blockchain technology. The FCA recognises this and wants to develop a safe, competitive and sustainable cryptoasset sector which is underpinned by market integrity and consumer protection. Qualifying stablecoin issuers will, therefore, face strict prudential standards, including a requirement that backing assets are sufficient to maintain stability and, where an issuer is also a custodian, client qualifying stablecoins are segregated from the firm’s own qualifying stablecoins in separate wallets. Consumers will also need to be granted clear redemption rights.
The convergence of new consumer protections and the restructuring of the regulatory architecture in 2026 presents a dual challenge of heightened liability and operational overhaul for payments businesses. With liability to victims of APP fraud now split 50:50 between sending and receiving firms, firms can no longer view fraud prevention solely as an outbound concern. This shift fundamentally alters the risk profile of offering accounts, as receiving firms, often smaller FinTechs or Electronic Money Institutions, face direct P&L exposure for every scam that lands on their ledger, necessitating a move away from relying on the sender’s checks to implementing robust inbound transaction monitoring. Simultaneously, the new rules on contract termination restrict firms’ commercial freedom to offboard clients; the requirement to provide specific reasons and longer notice periods exposes firms to greater litigation risk and potential complaints to FOS if ‘de-banking’ decisions are deemed arbitrary or opaque.
The rollout of VRPs threatens the dominance of traditional Direct Debits, offering firms a chance to capture market share with more flexible, transparent recurring payment solutions, provided there is the technical infrastructure to support them. Finally, the impending abolition of the PSR and its consolidation into the FCA signals a streamlined but potentially volatile transition period, where firms must navigate a changing supervisory approach alongside the introduction of the new regulated activity of ‘issuing qualifying stablecoins’, which will affect existing firms who wish to carry on that activity or provide the payment infrastructure to firms looking to issue qualifying stablecoins.
Firms should review and update their customer terms and conditions to align with the new contract termination rules, specifically drafting clear, objective criteria for account closure that can withstand regulatory scrutiny. Regarding APP fraud, firms’ immediate priority is to deploy or upgrade real-time inbound transaction monitoring systems. Firms should also consider conducting a ‘pre-audit’ of their fraud data to ensure their decision-making is consistent and evidenced ahead of the regulator’s effectiveness review in October 2026. For those holding customer funds, firms must conduct a gap analysis against the new ‘supplementary’ safeguarding regime commencing in May, ensuring their reconciliation processes and acknowledgement letters meet the bolstered standards to avoid the severe penalties historically levied for safeguarding breaches.
Firms and businesses in the digital asset space, must assess whether their current or any proposed business model triggers the new ‘issuing a qualifying stablecoin’ regulated activity; if so, they need to prepare a variation of permission or authorisation application and stress-test their backing assets to ensure they meet the strict liquidity and stability requirements mandated for fiat-referenced tokens.
Further details
For further details you can visit:
- the Payment Services and Payment Accounts (Contract Termination) (Amendment) Regulations 2025 here
- the FCA Policy Statement PS25/12 – Payments and Electronic Money (Safeguarding) Instrument 2025 here
- HM Treasury National Payments Vision here
- the proposed rules for systemic stablecoins at the Bank of England website here
- the FCA Consultation Paper CP25/14 – Stablecoin Issuance and Custody here
Cryptoassets
In the digital assets space, the regulatory framework continues to mature with a clear focus on productivity and market infrastructure. On 16 December 2025, the FCA released a comprehensive package of consultation papers (CP25/40, CP25/41, and CP25/42) that fundamentally reshape the UK crypto market. The consultation papers and draft rules proposed in them move beyond the previous ‘registration-only’ model for anti-money laundering to establish a full authorisation regime designed to mature the market, attract institutional capital and set a definitive countdown for compliance. The regulator has confirmed that the authorisation gateway for firms will open on 1 October 2026, with the full market abuse and conduct regime entering into force on 1 December 2026. The key themes of each consultation paper are:
- Authorisation & Supervision (CP25/40): Proposed rules and guidance for new cryptoasset regulated activities including, operating a cryptoasset trading platform, dealing in qualifying cryptoassets as principal or agent, arranging deals in qualifying cryptoassets, providing qualifying cryptoasset staking services and safeguarding qualifying cryptoassets. Firms currently registered under the UK Money Laundering Regulations (MLRs) must prepare for a ‘lifting and shifting’ process to obtain full FCA authorisation starting in Q4 2026
- Admissions & Disclosures and Market Abuse (CP25/41): A bespoke market abuse regime is being introduced. This aims to tackle insider dealing and market manipulation on crypto trading venues, addressing a key barrier to institutional adoption
- Prudential Requirements (CP25/42): This paper sets out the FCA’s proposed prudential framework for all cryptoasset firms requiring authorisation. The regime introduces Permanent Minimum Requirements ranging from £75,000 for arranging or dealing as agent, to £750,000 for principal dealers. To support market discipline, the FCA proposes a tailored public disclosure regime, requiring firms to publish information annually on risk management, own funds, capital requirements and, where relevant, group arrangements
Implications for businesses
For existing MLR-registered firms, the ‘lift and shift’ concept is deceptive; while it implies a smooth transition, the reality is a significant jump in regulatory scrutiny. Firms are moving from a regime focused primarily on the source of funds to a holistic authorisation process that interrogates their business model, governance, capital adequacy, and operational resilience. The introduction of the bespoke market abuse regime creates a new sphere of liability for trading venues and intermediaries, who will be held accountable for detecting and preventing insider dealing and market manipulation.
Actions for businesses to consider
Firms must treat the period between now and the October 2026 gateway opening as a pre-application phase, focus on the adequacy of their non-financial resources and senior management arrangements. Firms who operate a trading venue or execute client orders, will need to procure or build market surveillance systems capable of flagging suspicious transaction patterns in real-time to comply with the new Market Abuse Regime.
Firms will need to redraft custody terms and strictly verify their asset segregation models; firms must ensure that client cryptoassets are held in a manner that is truly insolvency-remote, protecting them from their own creditors.
Further details
For further details you can view:
- Consultation Paper CP25/40 – Regulating Cryptoasset Activities here
- Consultation Paper CP25/41 – Admissions & Disclosures and Market Abise Regime for Cryptoassets here
- Consultation Paper CP25/42 – A Prudential Regime for Cryptoasset Firms here
- the draft Financial Services and Markets Act 2000 (Regulated Activities and Miscellaneous Provisions) (Cryptoassets) Order 2025 here
You can also read our recent article where we explored the FCA’s high-level proposals in CP25/25 on how its Handbook would apply to newly regulated cryptoassets here.
Consumer Credit: Buy-Now-Pay-Later (BNPL)
The regulation of BNPL credit products is finally set to commence. From 15 July 2026 (Regulation Day), third-party BNPL agreements will become regulated credit agreements. These cover arrangements where the lender and the supplier of goods or services that are being financed are not the same person, and arrangements between a merchant and a lender, so that the lender becomes the legal supplier of goods and services to the customer.
Implications for businesses
If your business provides or brokers third-party BNPL solutions, you must ensure you have the appropriate FCA permissions, unless an exemption applies, and that your pre-contractual disclosures and creditworthiness assessments comply with a proportionate FCA rules-based regime. We expect the FCA to publish a consultation paper on this in Q1 2026. Notably, there is a key credit broking exemption which applies to merchants introducing their customers to newly regulated BNPL agreements.
The FCA will be operating a Temporary Permissions Regime which allows existing BNPL firms to continue operating legally while they apply for full authorisation. Firms will need to notify the FCA and register for temporary status during the notification window which is expected to open two months before Regulation Day, ensuring continuity for consumers while new rules, including affordability checks, are phased in. Once registered, firms will have approximately six months from Regulation Day to apply for full authorisation.
By categorising these agreements as regulated credit, lenders face a new commercial reality where mandatory, albeit more proportionate, creditworthiness checks and disclosures will inevitably add friction to the customer journey, potentially impacting conversion rates for merchants who allow customers to purchase goods and services with BNPL products.
Actions for businesses to consider
Unauthorised BNPL lenders or brokers seeking authorisation, must prepare their authorisation application and compliance framework now, as the authorisation process is rigorous and can take several months to finalise. Those BNPL lenders or brokers who intend to avoid a regulated status, must restructure their product and/or service offering or plan for an orderly exit. Lenders should also work with merchants to reconfigure their checkout processes and seamlessly integrate the required credit checks and pre-contract disclosures to minimise cart abandonment.
Further details
For further details you can visit the FCA’s website about the regulation of BNPL lending here.
Consumer Credit: Consumer Credit Act Reform
In 2022, HM Treasury published a public consultation on the reform of the Consumer Credit Act 1974 (CCA) and published a response in 2023 indicating that further consultation would take place. The Phase 1 consultation closed in July 2025 and HM Treasury is considering feedback. Next steps will be announced in due course. This reform seeks to modernise regulation governing the UK’s £200bn non-mortgage consumer lending market by moving much of the Act so that it sits under the more agile regulatory framework of the FCA.
As flagged in its Regulatory Initiatives Grid (December 2025), the FCA is launching a comprehensive review of Chapter 3 of the Consumer Credit Sourcebook (CONC 3). The FCA wants to assess whether the current prescriptive rules on financial promotions are still necessary now that the outcomes-based Consumer Duty is embedded. Under this work, the FCA will be reviewing the financial promotions rules, with a particular focus on CONC 3.5, to identify opportunities to reduce the level of prescription currently required and to be more outcomes focused in line with the Consumer Understanding Outcome of the Consumer Duty.
Actions for businesses to consider
Firms should actively participate in the Phase 2 consultation to help shape how critical consumer rights are transferred, ensuring the new framework remains workable for their operational systems. Regarding financial promotions, do not wait for the rule changes; firms should begin auditing their marketing approval frameworks now to ensure they are driven by Consumer Duty outcomes rather than just technical CONC compliance, ready to adapt quickly when the prescriptive rules are repealed.
Further details
For further details, please see the closed HM Treasury Consumer Credit Act Reform Phase 1 Consultation here.
Consumer Credit: Motor Finance
Implications for businesses
The proposed scheme structure introduces a four-stage process firms must operationalise:
- Identification and consent: Firms must identify all in-scope agreements (entered into between April 2007 and November 2024). Crucially, the scheme operates on a mixed model: consumers who have already complained are automatically included (opt-out), while firms must proactively invite other affected customers to join (opt-in)
- Liability assessment: Firms must determine if the relationship was unfair based on the presence of a DCA, high fixed commission (typically >35% of the total cost of credit), or undisclosed exclusivity ties
- Redress calculation: Compensation will generally be calculated using either a refund of the commission plus interest or an ‘APR adjustment’ remedy (applying a reduced APR to the original loan), depending on which offers the consumer the better outcome
- Determination phase: Firms must issue a provisional decision, which the consumer has one month to accept or reject
Consumer Credit: Regulated Home Finance
In a move to reduce regulatory duplication and support the housing market, the FCA has signalled that the Government can now safely retire the Mortgage Charter, which was the voluntary scheme entered into by 90% of the market in 2023 to support borrowers during the interest rates spike. With the mortgage market showing resilience and flexibility on stress testing, the FCA is satisfied that the protections in MCOB and through the Consumer Duty are sufficient to support borrowers. Retiring the Mortgage Charter is intended to reduce reporting burdens on lenders who had to submit Mortgage Charter data alongside their usual regulatory returns.
Implications for businesses
Firms must not interpret this deregulation as a signal to lower their forbearance standards; the FCA’s decision is explicitly predicated on the fact that MCOB and the Consumer Duty provide an equivalent safety net. Consequently, firms’ conduct risk remains high. If treatment of borrowers in arrears deteriorates following the Mortgage Charter’s removal, firms will face intense scrutiny for failing to deliver the ‘good outcomes’ mandated by the Consumer Duty.
Actions for businesses to consider
Firms should initiate the decommissioning of the specific data collection protocols and reporting workstreams built for the Mortgage Charter, ensuring a clean break from these obligations. Concurrently, firms must review and update their arrears management policies and call-centre scripts to remove references to Mortgage Charter specific options, replacing them with clear guidance on standard MCOB forbearance tools to ensure staff continue to offer appropriate support to borrowers in arrears.
Code of Conduct (COCON) and Senior Managers & Certification Regime (SM&CR)
In September 2026, a new non-financial misconduct rule will explicitly bring serious bullying, harassment, and discrimination within the scope of the COCON for all firms, not just banks. The new rule will make explicit that serious non-financial misconduct in the workplace falls within the regulatory perimeter for non-banks. Non-financial misconduct will be a conduct issue under COCON if it:
- has the purpose or effect of violating an individual’s dignity or creating an intimidating, hostile, degrading, humiliating or offensive environment; or
- involves violence towards an individual
This means such behaviour can constitute a breach of regulatory rules for firms’ staff, with direct implications for fitness and propriety assessments.
In parallel, HM Treasury and regulators are expected to publish final rules on the simplified SM&CR in and around mid-2026. These reforms aim to reduce administrative burdens, such as relaxing the 12-week rule to give firms more time and flexibility to submit applications for approving new Senior Managers when there has been an unexpected or temporary change, creating a more proportionate regime without diluting individual accountability. Looking further ahead, firms should prepare for ‘Phase 2’ of the SM&CR reforms, which proposes radical legislative change. HM Treasury is consulting on removing the legislative requirement for the Certification Regime entirely, replacing it with a more flexible rule-based framework, and potentially removing the requirement for regulatory pre-approval for certain lower-risk Senior Management Functions.
The explicit inclusion of non-financial misconduct within COCON in September 2026 marks a watershed moment where internal culture becomes a direct regulatory liability. By classifying serious bullying, harassment, and discrimination as regulatory breaches, the FCA has effectively deputised firms’ compliance function to police workplace behaviour, meaning HR grievances can now trigger reportable conduct rule breaches and potentially limit a career via a negative fitness and propriety assessment.
Actions for businesses to consider
Firms should ensure that all staff are aware of the types of behaviour that will not be tolerated and will be subject to internal disciplinary proceedings and, potentially, regulatory sanction. Firms must also update HR and Compliance processes to ensure that allegations of non-financial misconduct are investigated with the rigour of a regulatory breach. This will likely require updating fitness and propriety assessment templates and disciplinary policies and procedures to explicitly reference the new COCON scope, ensuring that evidence of bullying or discrimination is formally captured and weighed against an individual’s certified status.
While the stakes are being raised for individual accountability, the concurrent simplification of the SM&CR offers a commercially welcome reduction in bureaucracy. The proposed reforms will grant firms greater operational agility when covering senior absences. The ‘Phase 2’ reforms represent a potential dismantling of the most bureaucratic elements of the accountability regime. It suggests a future where firms can tailor their internal certification processes to the actual risks in their businesses, rather than following a rigid statutory template.
Firms should prepare to resource a detailed response to the HM Treasury Phase 2 consultation and map out their current ‘lower-risk’ Senior Management Functions and Certification staff to model the cost and time savings of a simplified regime, to ensure readiness to pivot HR processes to a lighter, rule-based framework when the legislation passes.
Further details
For more information, please see FCA Policy Statement PS25/23 – Tackling non-financial misconduct in financial services here.
Although the HM Treasury Phase 2 Consultation Paper is not available yet, the FCA’s Consultation Paper CP25/2, setting out proposed changes to the SM&CR can be found here, and the HM Treasury SM&CR Reform Consultation can be found here.
Insurance: Premium Finance
The FCA’s scrutiny of the insurance sector is set to intensify following the conclusion of its Market Study into Premium Finance, MS24/2. Having identified that over 20 million adults rely on paying for insurance in instalments, the FCA has flagged concerns that this essential mechanism often fails to provide fair value. Analysis highlighted that APRs typically range between 20% and 30%, which is significantly higher than comparable lending products like personal loans, despite the relatively low credit risk to the provider given they can simply cancel the policy upon non-payment.
Crucially, the FCA found that for many firms, revenues from premium finance materially exceed the economic costs of providing the credit. With the final report expected early in 2026, this year will likely be the year of intervention as the FCA has signalled it will use the Consumer Duty to challenge high-margin models and double dipping, where consumers face both higher base premiums and disproportionate finance costs. Firms should expect the regulator to demand robust justification for any significant price differential between annual and monthly payments.
The comparison to personal loan APRs (20-30%) sets a new benchmark for ‘fair value’, meaning that legacy pricing models which generate revenues materially exceeding the economic cost of credit may be deemed a breach of the Consumer Duty. This is not just a compliance issue; it is a commercial one that threatens to compress margins and necessitate a repricing of core products if the ‘subsidy’ from finance charges is removed.
Actions for businesses to consider
Firms should revisit their Fair Value Assessments to empirically justify the differential between their annual and monthly prices. Firms should be able to demonstrate their finance charges cover actual costs (such as cost of funds, bad debt administration, and third-party fees) rather than acting as a hidden profit lever; where there are significant differentials which cannot be reasonably justified, firms may want to consider reducing these fees proactively before the final report triggers mandatory intervention.
Further details
For further details you can visit the FCA’s dedicated page about MS24/2 – Premium Finance Market Study here.
Insurance: Captives and Alternative Risk Transfer
Firms and large corporates should also note the development of a bespoke UK captive insurance regime, led by HM Treasury, the Prudential Regulation Authority and the FCA. Captive insurance involves the establishment of an insurance undertaking that provides insurance services to its parent or other members of a corporate group. The UK is aggressively positioning itself as a global hub for insurance capital and a consultation paper setting out draft rules is expected in the summer of 2026. This aims to make the UK a competitive alternative to traditional offshore domiciles for captive insurers and reinsurers.
Implications for businesses
The development of a bespoke UK captive insurance regime presents a significant strategic opportunity for large corporate organisations outside the traditional insurance sector. By facilitating the creation of ‘onshore’ captives, the Government is offering businesses a way to self-insure and manage complex risks within the UK jurisdiction, potentially reducing the administrative friction and reputational questions associated with managing capital in offshore domiciles.
Actions for businesses to consider
Large corporate clients with significant insurance spend should consider commissioning a feasibility study to assess the benefits of the incoming UK captive regime. They should engage with their risk managers and tax advisers in Q3 2026, once the draft rules are published, to model whether placing or moving their risk management structures onshore offers capital efficiency or governance benefits under the new, competitive framework.
Packaged Retail and Insurance-based Investment Products (PRIIPs) and the Consumer Composite Investments (CCI) Regime
The regulatory framework for asset managers is undergoing a comprehensive overhaul to drive efficiencies. The Government intends to replace the existing PRIIPs Regulation with a new, domestic CCI regime. From April 2026, if you manufacture or distribute investment products to retail investors, you will transition to producing a ‘Product Summary’ rather than a PRIIPs Key Investor Document (KID).
This new FCA-led framework aims to be more flexible and proportionate and is underpinned by the Consumer Duty, requiring firms to ensure consumers receive clear, concise information at the right time to make properly informed investment decisions. The current PRIIPs regime requires firms to explain their products using rigidly prescribed document templates which often contain excessive amounts of information, are unengaging, and typically rely on legalistic financial jargon. From April 2026, product manufacturers will have considerable freedom over the design of product summaries, so long as they provide information to consumers simply and clearly, using language which consumers can easily understand.
Implications for businesses
This provides firms with a welcome escape from the often-misleading performance scenarios of the KID. By transitioning to the new Product Summary, firms gain greater flexibility to present risk and return data in a way that genuinely reflects their strategy, rather than forcing it into a prescriptive EU-derived template. However, this flexibility shifts the burden of accuracy onto firms; without the strict template to hide behind, compliance teams must ensure these new summaries are robust enough to withstand Consumer Duty scrutiny.
Actions for businesses to consider
Manufacturers should begin to design their new Product Summary templates, ensuring they capture the necessary risk metrics without simply replicating the defects of the old PRIIPs KID. Distributors will have the option to prioritise key information before providing a product, avoiding information overload and helping consumers navigate complex financial decisions. The FCA expects distributors to use the information received from manufacturers to produce compelling consumer journeys that help people find the right products for them. Manufacturers should be engaging with distributors now, rather than waiting until April 2026.
Further details
For further details you can visit the FCA Policy Statement PS25/20 – Final Rules for CCIs here.
Tokenisation of Funds
To unlock efficiencies in the sector, the FCA is actively supporting the ‘tokenisation’ of funds, which is seen as a key component of future financial services. Tokenisation is a way of representing an asset, or ownership of an asset, by recording it on distributed ledger technology (DLT). DLT is a digital system that records details of transactions in multiple locations at the same time, rather than on a centralised database.
Tokenisation can make fund management more efficient, as it gives firms operating or distributing the fund the same records of information, thereby reducing the costs of reconciling and sharing data. In 2026, the FCA is expected to publish its final regulatory requirements for fund tokenisation, with a view to providing clarity and confidence for firms to adopt this technology, positioning the UK as a centre of excellence for fund tokenisation. The rules will embed the ‘Blueprint’ model, which allows authorised fund managers to operate a fund’s unitholder register using DLT within the existing regulatory framework. The FCA will also implement an optional, alternative dealing model where investors can transact directly with the fund, or its depositary, rather than through an authorised fund manager, thereby reducing operational overheads and aligning the UK model with those used in other jurisdictions like Ireland and Luxembourg.
Implications for businesses
The final rules are expected to confirm that firms can use public blockchains, provided they have adequate controls in place to manage associated risks like operational resilience and data privacy. This is not just a tech upgrade; it is a market infrastructure reset that enables firms to settle transactions near-instantly, stripping out layers of reconciliation costs and administrative friction.
Actions for businesses to consider
Fund prospectuses and constitutional documents should be reviewed to ensure they permit the issuance of digital units or tokens alongside traditional shares or units. Simultaneously, firms should engage with custodians and administrators to determine if their legacy systems can interact with distributed ledger technology (DLT), or if specialist partners should be onboarded to handle the register of members in a tokenised environment.
Alternative Investment Fund Managers Directive (AIFMD)
In April 2025, HM Treasury published a Consultation Paper proposing to streamline the framework for the regulation of Alternative Investment Fund Managers (AIFMs). At the same time, the FCA published a Call for Input, setting out the FCA’s approach to regulating AIFMs within the proposed framework. Proposals include removing the ‘small authorised’ and ‘small registered’ thresholds in the AIFMD regulations. Instead, a unified authorisation requirement will be introduced based on Net Asset Value (NAV), categorising AIFMs into small, mid-sized, or large to apply proportionate rules.
Implications for businesses
The proposed abolition of the binary ‘small registered’ versus ‘full scope’ distinction fundamentally alters some firms’ regulatory statuses. By moving to a graduated, NAV-based authorisation regime (small, mid, large), relevant firms face a more complex, albeit proportionate, compliance environment where regulatory burden grows linearly with net asset value. This is particularly critical for AIFMs currently operating near the existing thresholds; the creation of a ‘mid-sized’ tier likely introduces new reporting and capital obligations for those who previously enjoyed the ‘light-touch’ regime, effectively removing the regulatory arbitrage of staying just small enough to avoid full authorisation.
Actions for businesses to consider
Firms should model their current and projected NAV against the proposed new banding thresholds to identify where they will land in the new three-tier system. Firm’s may also want to conduct a gap analysis of their current reporting capabilities; for those likely to be categorised as ‘mid-sized’, firms should prepare to upgrade their data collection systems now to handle increased transparency requirements that will exceed their current ‘small registered’ obligations.
HM Treasury and the FCA will consider feedback and responses to the Consultation Paper and Call for Input and the FCA is expected to consult on detailed rules in H1 of 2026.
Advice Guidance Boundary
The FCA's work to close the ‘advice gap’ will see a new authorisation gateway for ‘Targeted Support’ open in March 2026. This new regime is designed to allow firms to provide more personalised support to consumers, such as suggesting products based on ‘people like you’, without crossing the line into fully regulated advice. For firms that operate in the pensions or retail investment space, this offers a strategic opportunity to engage a wider segment of their customer base who currently receive no support.
Implications for businesses
By allowing firms to provide suggestions designed for groups of consumers with common characteristics to help them make important decisions across their pensions and investments, the regulatory barrier that forced firms to leave mass-market customers unserved because they could not afford holistic advice is effectively removed. However, ‘Targeted Support’ is a new regulated activity, distinct from full advice, not a relaxation of existing rules; it requires a distinct variation of permission and subjects firms to a new liability standard where they must prove their suggestions deliver ‘better outcomes’ for the target group.
Actions for businesses to consider
Relevant firms may wish to commence a segmentation analysis of their client database to identify the specific cohorts that would benefit from this regime, such as accumulators holding excess cash or retirees. Simultaneously, firms should prepare their applications for the March 2026 gateway by drafting the necessary variation of permission request, ensuring their compliance framework can distinguish between this new Targeted Support and full regulated advice to prevent regulatory creep.
Further details
For further details you can visit the proposals for the Advice Guidance Boundary Review at the FCA website here.
Sustainability and ESG
The FCA’s regulatory perimeter is expanding to cover ESG ratings providers. HM Treasury is finalising legislation to make ‘providing an ESG rating’ a regulated activity, with a full authorisation regime expected to come into force in 2028, but preparation should begin as the FCA consults on the rules throughout 2026.
Persons who provide ESG ratings are moving from an unregulated environment to a fully authorised regime, meaning their methodologies and governance will soon face direct regulatory scrutiny. This ends the era of ‘black box’ scoring; their commercial value will increasingly depend on their ability to demonstrate transparency and conflict management to the regulator.
Actions for businesses to consider
Affected businesses should assess whether their scoring activities fall within the proposed definition of ‘providing an ESG rating’ to determine if they will require FCA authorisation. They should also engage with the 2026 consultation process now to help shape the rules on transparency and governance before they are finalised.
Further details
For further details you can the FCA Consultation Paper CP25/34 – ESG Ratings: Proposed Approach to Regulation here.
Consumer redress reforms
HM Treasury, the FCA and the Financial Ombudsman Service (FOS) are implementing significant reforms in 2026 to make the UK redress framework faster, clearer and more predictable, benefitting both consumers and firms. These changes aim to reduce delays in mass complaint events and restore confidence in the system by aligning FOS decisions more closely with FCA rules.
Key proposals include a new referral process for regulatory ambiguities, a ‘lead complaint’ mechanism to manage large-scale issues collectively, and enhanced guidance for firms to resolve problems before escalation. HM Treasury’s review recommends refining the FOS’s ‘fair and reasonable’ test so that, where FCA rules are specific and material to a complaint, compliance with FCA rules generally equates to fair conduct, reducing uncertainty for firms.
Operational improvements start in early 2026, including a mandatory complaint registration stage, streamlined decision frameworks for common cases, and a new compensation interest rate (Bank of England base rate +1%). Longer-term changes under consultation include a 10-year long-stop for historic complaints and clearer boundaries between FOS and FCA responsibilities. Later in 2026, the FOS is also expected to consult on introducing differentiated price points for case fees.
Implications for businesses
The introduction of an absolute 10-year longstop for FOS complaints represents a critical restoration of legal certainty for firms. It closes the door on the indefinite liability, where the ‘date of knowledge’ rule allowed legacy claims to resurface decades later. Even more significant is the revision of the ‘fair and reasonable’ test; this change dramatically reduces firms’ conduct risk by aligning the FOS’s decision-making with the FCA rulebook. In practice, this means firms should no longer face the frustration of strictly adhering to the regulator’s rules only to be overruled by an Ombudsman applying a subjective fairness standard retrospectively.
Actions for businesses to consider
Firms should monitor policy statements expected in Q1 2026, review complaint-handling processes, and prepare for greater regulatory coordination. Early engagement with consultations will help shape a system designed to deliver quicker, fairer outcomes for consumers while providing predictability for businesses.
Key contact
Sushil Kuner
Partner & Head of Financial Services Regulation
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