Horizon scanning: UK regulatory topics to look out for in 2026

1. Growth and Competitiveness and the Smarter Regulatory Framework: Assimilated Law and International Co-operation

One theme of recent years in regulatory reform is the introduction of various measures aimed at encouraging growth and competitiveness in UK financial services. This arguably started with the previous Government’s introduction of the Smarter Regulatory Framework and has continued with the current Government’s “Leeds Reforms” set out in summer 2025, and we will be discussing in more detail some of the specific regulatory change initiatives that will be part of this continuing programme into 2026. However, one ongoing piece of cross-cutting regulatory reform aimed at facilitating this relates to the ongoing work in relation to assimilated law (for example, EU laws that had been retained in UK law following Brexit).

The Government’s programme of revocation of assimilated law and the introduction of replacement rules in the Financial Conduct Authority (FCA) Handbook and Prudential Regulation Authority (PRA) Rulebook was ongoing throughout 2025 and will continue further into 2026, covering topics including changes to prudential requirements, markets regulation and asset management legislation, discussed further below. Most recently, the reform of requirements in relation to the Markets in Financial Instruments Directive II (MiFID II) Organisational Regulation¹ has moved forward with replacement rules coming into force in Q4 2025 and early 2026. Following this, the FCA is now also consulting on changes to the transaction reporting regime under the Markets in Financial Instruments Regulation (MiFIR) with a policy statement on the proposed changes promised for the second half of 2026 and a likely transitional period of around 18 months after that. In addition, the FCA also set out that it will be launching a cross-authority and industry working group to look at a variety of other transaction reporting requirements during the course of 2026. 

That said, the post-Brexit reforms aimed at making the UK an attractive place for financial services firms hasn’t been focussed solely on domestic changes. In relation to this, the Overseas Recognition Regime Regulations² having come into force in Q4 of this year and the Berne Financial Services Agreement coming into force on 1 January 2026 arguably sets the scene for more cross-border provision of services throughout 2026 and beyond.

And on the cross-border theme, in October, HMT announced the launch of the "Office for Investment: Financial Services" which will provide a ‘concierge’ service guiding foreign investors from their initial entry into the UK market through to expansion. The new service is an important component of the Government’s Financial Services Growth and Competitiveness Strategy, and, in 2026, we expect to see the service providing tailored regulatory and business support to attract investment in the UK. 

As part of this strategy, the FCA has also been encouraged by the Government to consider how it can help to build a stronger investment culture in the UK and, in December 2025, the FCA set out a suite of measures aimed at achieving this. Several of the measures brought forward as part of this package are discussed further below but one particular area of regulation that has been under the spotlight is the Consumer Duty. In September, the FCA’s CEO responded to the Chancellor’s request to assess whether the Consumer Duty, aimed primarily at protecting retail investors, unduly affects wholesale activity and set out that it is intending to take forward a plan to address these concerns during the course of 2025 and into 2026. In its December 2025 statement, the FCA  provided an update on its progress in relation to this plan setting out: (1) clarifications in relation to its current supervisory approach and regulatory expectations in instances where firms work together to manufacture a product or service; and, (2) that in the first half of next year the FCA intends to consider stakeholder views and concerns about the application of the Consumer Duty to develop proposals for consultation, for example in relation to clarifying when the Consumer Duty applies, the availability of certain exemptions and when firms can rely on each other as part of distribution chains. With that in mind, hopefully firms will be able to adapt their approach to the Consumer Duty where appropriate during the course of next year. 

From an enforcement perspective, the FCA has confirmed the existence of at least one ‘enforcement operation’ involving a firm and an individual for potential breaches of the Consumer Duty and we expect to see more of these cases coming down the track during 2026.

2. Individual Conduct

Another area of cross-cutting reform that will continue into 2026 relates to proposed changes to the Senior Managers and Certification Regime (SMCR). Earlier this year the Chancellor arguably set a clear direction of travel for regulators to reduce costs and administrative burdens for firms in relation to this regime. What this looks like in practice should become clearer in 2026, with the FCA and PRA policy statements in relation to phase one of the reforms (for example, the changes that don’t require legislative amendments), such as to the twelve-week rule, duration of criminal records checks and submission of statements of responsibilities, expected in mid-2026.

In addition, it is expected that we will also get some clarity on phase two of the changes (for example, those requiring amendments to the Financial Services and Markets Act 2000) such as on proposals to remove the Certification Regime from legislation, reduce the overall number of senior manager roles and roles that require pre-approval, and remove certain other prescriptive legislative requirements, with a view to giving the FCA and PRA more flexibility to adapt and adjust the rules more easily over time. The legislative timetable for this and subsequent plans for consultation on replacement rules from the regulators will be something to look out for next year.

From an enforcement perspective this year, we have continued to see cases against senior individuals, including for breaches of the conduct rules and for being knowingly concerned in a breach of the Listing Rules, and we expect individual accountability to remain an enforcement focus during 2026. Lessons learned from the cases here include the importance of senior representatives: informing themselves adequately in relation to their responsibilities; providing the regulators with accurate and timely information; taking reasonable steps to identify and manage conflicts of interest; and keeping appropriate contemporaneous records of discussions held.

Staying on the topic of individual conduct issues, non-financial misconduct (NFM) has been a regulatory focus during 2025, and this will continue.  In July, the FCA issued a paper on NFM which confirmed that the FCA is expanding the scope of its Code of Conduct (COCON) in non-banks with effect from September 1, 2026. In addition, in December, following a consultation, the FCA published its final guidance on NFM, amending its COCON sourcebook to explain how NFM can be a breach of the conduct rules and to make it easier for firms to interpret and consistently apply the rules; and explaining how NFM forms part of the Fit and Proper test for Employees and Senior Personnel sourcebook. This new guidance will come into force on September 1, 2026 and the FCA has stated that this publication brings its policy work on NFM to a close. 

In terms of supervisory and enforcement caseload in this area, as of October 2025, the FCA had 76 open supervisory cases tagged as relating to NFM and there is one open high-profile NFM enforcement case in which a Decision Notice published in March 2025 has been referred to the Upper Tribunal, with a hearing due to take place in March 2026. We expect to see continuing supervisory and enforcement activity regarding NFM during next year and, in light of this, firms should ensure policies, training and reporting channels are robust, and that leaders can evidence that they set the right tone to prevent and address NFM. 

3. Retail reforms

At the macro level the key issues for the retail financial services industry in 2026 include navigating on-going economic uncertainty, addressing new regulatory requirements and managing rapid technological change, particularly AI and cybersecurity. Consumer expectations for personalised and seamless digital experiences are driving much of this change. Set out below are some of the major forthcoming regulatory requirements

Arguably, the motor finance consumer redress scheme will be the one to watch in 2026. Following the much-anticipated Supreme Court judgment in the case of Johnson and others in August, in October the FCA published its consultation paper setting out its proposals in relation to an industry-wide redress scheme to compensate motor finance customers who were unfairly treated between 2007 and 2024. The FCA’s analysis suggests that the motor finance industry is set to provide over £8 billion in redress but is also likely to spend almost £3 billion to implement the scheme; confirming that, as consulted upon, the scheme will be one of the most significant consumer redress schemes the sector has ever seen. In November, the FCA extended the consultation deadline to mid-December, but the FCA still expects to publish final rules in February or March next year, and proposes that firms would then have six weeks to provide the FCA with a ‘delivery forecast’, subject to any challenge from industry or consumers.  Any implementation failures by firms could give rise to enforcement action, including against senior managers, for example in relation to false attestations they have provided.

With all the noise on motor finance it is quite easy to forget that HM Treasury (HMT) is in the middle of conducting the first phase of its consultation on reforming consumer credit. In summer 2025, HMT issued its ‘Phase 1’ consultation which outlined the Government’s overall vision for a reformed consumer credit regime which involves repealing many of the provisions of the Consumer Credit Act 1974 (CCA 1974) and recasting them in the FCA Handbook. The next stage is for HMT to publish a response to its consultation and issue a further consultation setting out ‘Phase 2’ which involves how the Government intends to reform the scope of regulation and rights and protections under the CCA 1974. 

In addition, summer 2025 saw a lot of activity regarding reforms to buy-now-pay-later (BNPL) credit products. The Financial Services and Markets Act 2000 (Regulated Activities etc.) (Amendment) Order 2025 was made bringing interest-free BNPL agreements into the scope of regulation whilst providing for an exemption intended to ensure that most merchants (for example, e-commerce websites) are not subject to credit broking regulations when they refer customers to third-party BNPL providers (for example, offering a third-party BNPL product at checkout, not their own finance product). The statutory instrument came into force on July 15, 2025 for the purpose of transitional arrangements and will come into force on July 15, 2026 (commonly known as ‘Regulation Day’) for all other purposes. The FCA has already issued a consultation paper regarding its proposed policy approach, CP25/23, and a policy statement is expected in Q1 2026. A negative statutory instrument is also to be laid in the future which will remove the requirement for domestic premises suppliers to have credit broking permissions to offer BNPL products. This negative statutory instrument is expected to be in place to coincide with the regulation of BNPL.

One area where the FCA has set out final rules is in relation to targeted support. As part of the Advice Guidance Boundary Review, the FCA proposed a new form of ‘targeted’ support in pensions and investments, which would enable firms to provide suggestions designed for groups of consumers with common characteristics to help them make important decisions. In its policy statement, the FCA explains that it is on track to enable firms to begin applying for permission to provide targeted support from March 2026, before the new rules come into effect, subject to legislation and that it expects the rules to take effect from April 6, 2026. The FCA is also planning to consult on simplifying and consolidating its investment advice rules and guidance and a consultation paper is due to be published in early 2026 with a policy statement expected towards the end of the year. 

Another area where the FCA has set out final rules is in relation to providing information on Consumer Composite Investments (CCIs). The CCI regime will replace the Packaged Retail and Insurance-based Investment Products (PRIIPs) regime and the Undertakings for Collective Investment in Transferable Securities (UCITS) disclosure requirements with a single framework tailored for UK consumers and markets, also with the stated aim of facilitating a stronger retail investment culture in the UK. The FCA has confirmed in its policy statement that there will be an 18-month implementation period before the regime comes fully into force. As a result, firms will have 2026 and into 2027 to familiarise themselves with the new rules and make the necessary changes to their systems to reflect the new requirements.

There are also ongoing reform proposals in relation to the Financial Ombudsman Service (FOS) to keep an eye on in 2026. Following the Economic Secretary’s review, in July 2025, HMT published a consultation proposing a package of reforms to the legislative framework in which the FOS operates, designed to stop the FOS acting as a quasi-regulator and ensure that the FOS is delivering its role as a simple, impartial dispute resolution service. Alongside this HMT consultation, also in July, the FCA and FOS published their own consultation paper, seeking views on proposals to modernise the redress framework. The FCA recognises that the current redress regime can create uncertainty for consumers and firms, and it wants to achieve greater predictability and transparency, with appropriate responsibility for firms to identify and address redress issues early on. Both consultations closed in October, and we are currently awaiting the outcome.

Finally, the insurance industry will be digesting the FCA’s response to Which?’s super-complaint regarding home and travel insurance, which was published on 18 December. In light of the super-complaint, the FCA has stated that it is expanding its work to improve standards in the home and travel insurance markets to: (i) improve claims handling and service quality by reviewing firms’ customer service and delivery and how they oversee third parties that handle claims; and (ii) improve consumer understanding by analysing how firms’ different sales processes affect the outcomes people are getting. The FCA has stated that it will also continue to progress ongoing work in these markets, as well as continue to act against insurance firms where it has concerns.

4. ESG

On May 31, 2025, the FCA’s anti-greenwashing rule, which was introduced as part of the UK’s broader Sustainable Disclosure Requirements (SDR) framework, became a year old. From the outset, the rule has applied across the entire spectrum of UK financial services firms, regardless of size or sector so as to promote a culture of transparency and accountability in how sustainability is communicated to clients and the market. The FCA has been actively monitoring firms for their compliance with the anti-greenwashing rule, and the rule has been referred to in official communications particularly the February 2025 portfolio letter to the asset management and alternatives sector.  In parallel, the FCA continues to collaborate with both the Advertising Standards Authority and the Competition and Markets Authority (CMA) to address misleading sustainability claims. Notably, the CMA has taken enforcement action against several companies for potentially deceptive environmental claims. So, whilst the FCA has not yet delivered any enforcement outcome concerning a firm’s failure to comply with the anti-greenwashing rule, it is clear that the rule remains on the regulator’s radar, and it is probably only a matter of time before we see one. 

In terms of cases in the pipeline, the FCA confirmed last year that one climate-related investigation was opened in 2023, and a more recent announcement has confirmed that a further ESG-related investigation was opened in 2025. Whilst it remains to be seen whether either of these cases will result in penalties for the companies involved, it seems likely that other cases are also underway and that a decision may emerge in 2026, sending a message to the industry regarding the FCA’s approach to ESG matters.  

As regards the other components of the SDR framework, investment labels and rules and guidance on how firms market investment funds on the basis of their sustainability characteristics, the key milestone next year is that entity-level disclosure rules for firms with assets under management of over £5 billion come into force on December 2, 2026. But perhaps the bigger question is how the FCA will build on the SDR and evolve its scope and requirements. For example, HMT originally intended to issue a consultation on the application of the SDR and labelling regime for overseas funds in Q3 2024 but to date this has not been published. Will this change in 2026?

As part of the Mansion House papers, the Government dropped plans for a UK Taxonomy, but it is worth noting that, about three weeks beforehand, it issued three consultations intended to support banks and large companies in developing climate transition plans. These consultations, which included one that looked at how to take forward the Government’s commitment on transition planning, subsequently closed in September. Whilst the door may be closed on the UK Taxonomy, the Government is moving forward on the delivery of its commitments on transition plans and the sustainability reporting standards so more on this is expected next year.

5. Financial Crime

Financial crime remains high on the regulatory agenda, with key developments and enforcement activity across money laundering, fraud and market abuse in 2025, and more activity expected in 2026. Of note, in July, the FCA and the National Crime Agency (NCA) published nine economic crime priorities for the UK’s regulated sector, including cash-based money laundering, the exploitation of money mules and fraud associated with overseas jurisdictions.

In terms of money laundering specifically, in July 2025, the FCA published its finalised updated guidance for firms on the treatment of politically exposed persons, which reflects changes to the legislative framework since 2017. Firms should also engage with the FCA’s paper on risk assessment processes and controls published in November, which evaluates controls against, amongst other things, the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs) and the Financial Crime Guide, and forms part of the FCA’s wider financial crime supervisory work.

Looking ahead to 2026, following a public consultation the government is bringing forward targeted amendments to the MLRs and related legislation which aim to close regulatory loopholes, address proportionality concerns, and account for evolving risks in relation to money laundering and terrorist financing. The consultation highlighted specific weaknesses in the UK’s regime, including issues with pooled client accounts, trust registration, cryptoasset business regulation, and the practicalities of customer due diligence. Taking this into account, a draft statutory instrument was published in September, stated to be part of the government’s response to the concerns raised, and the final instrument is expected to be laid in early 2026. 

In other upcoming changes, following the announcement by HMT in October that the government has decided that the FCA should become the single professional services supervisor for anti-money laundering/ countering the financing of terrorism, an HMT consultation was published in November providing further details of the reform proposals and requesting responses by Christmas. The aims are improved consistency, transparency and effectiveness via a single supervisor and the proposals include: a new FCA register for all professional services firms; the application by the FCA of a fit and proper assessment to professional services firms and their owners; and the extension to the new population of existing powers such as skilled person requirements and directions.

From an enforcement perspective, this year the FCA has issued sizeable fines where firms’ anti-money laundering systems and controls have been inadequate and we expect to see similar cases coming through next year as the FCA seeks to continue sending important signals to the market.

With regards to fraud, the key recent change in this area is that the UK’s new failure to prevent fraud offence came into force on September 1, 2025 under the Economic Crime and Corporate Transparency Act 2023. Under the offence, large organisations may be held criminally liable where an employee, agent, subsidiary, or other “associated person” commits a specified type of fraud intending to benefit the organisation. In the event of prosecution, an organisation would have a defence if it could evidence reasonable fraud prevention measures in place at the time that the fraud was committed. The offence is designed to make it easier to hold large organisations to account where they profit from fraud and The Serious Fraud Office has made it clear that it is “ready to act if corporates fail to comply with their new responsibilities”. We may therefore see the first prosecutions coming through next year. In addition, the circumstances in which corporates can be prosecuted for certain economic crimes committed by senior managers has broadened in recent years and there are proposals to widen the scope still further. 

Finally, turning to preventing and detecting market abuse, we have already mentioned above the proposed changes regarding transaction reporting and HMT have also recently laid final legislation setting out details of a new regime in relation to market abuse for Cryptoassets and the FCA has also published proposals for consultation setting out more detailed rules in relation to this regime, alongside other proposals relating to the regulation of Cryptoassets, which we discuss further below. 

In terms of its priorities in tackling market abuse, the FCA has been focussing on organised crime groups, which it says represent the most serious threat to markets, and has also raised concerns about strategic leaks and unlawful disclosure. The FCA also recognises that technological advances such as AI bring the potential for increased market abuse. It has published a number of market-abuse related enforcement cases during 2025, including in relation to spoofing, insider dealing and transaction reporting, and we expect market abuse to be a continuing enforcement focus during 2026. 

6. M&A

From January 2026, the FCA will be measuring its performance against certain proposed new statutory deadlines and voluntary targets which include new firm authorisations and variations of permission applications being completed within 4 months (currently 6) for complete applications and 10 months (currently 12) for incomplete applications.

As of late 2025, the FCA is not making significant changes to the "change in control" requirements that apply generally across all authorised firms. Notwithstanding this, the Bank of England is due to introduce a set of requirements for central counterparties to help ensure that it is provided with comprehensive information on controllers to support well-informed decisions about controller suitability. And HMT is to follow up on its consultation on amendments to the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 which includes registration and change of control for cryptoasset service providers.

There have already been a number of recent changes to the UK’s short selling regime which include the publication of The Short Selling Regulations 2025. The Regulations gave the FCA the power to set out more detailed rules to complete the new regime and the regulator followed this up by publishing a consultation paper, CP25/29, in October. The FCA will issue its final policy next year which includes finalising its proposal to extend the deadline by which relevant persons are required to notify a change in their net short positions to 23:59 T+1.  

7. Prudential

On the banking side, the current official implementation date for the simplified capital regime for small domestic deposit takers is January 1, 2027 so further communications from the PRA on this topic are expected in 2026. For the larger players, January 1, 2027 is also the intended date for application of most of the UK legislation and regulation implementing the Basel 3.1 standards. Many expect that, in Q1 2026, the PRA will publish the final policy statement containing all the final rules and related policy material for the Basel 3.1 reforms. During this period, it is also expected that HMT will make the secondary legislation revoking the relevant provisions in the UK Capital Requirements Regulation relating to Basel 3.1. Modifications by consent for firms meeting certain criteria to disapply the Leverage Ratio part of the PRA Rulebook will cease to apply on June 30, 2026, meaning relevant institutions must be fully compliant with the leverage ratio requirements.

In December the Basel Committee on Banking Supervision issued its latest report as part of its Regulatory Consistency Assessment Programme which focused on how the UK has implemented the net stable funding ratio (NSFR) and the large exposures framework. The UK’s implementation of the NSFR standard and large exposures framework was assessed as largely compliant with the global standards, which was one notch below the highest overall grade. On the same day the Financial Policy Committee issued a paper, Financial Stability in Focus, assessing the level of capital requirements in the UK banking system and calling for views on what may warrant adjustment. Consequently, further changes to regulatory capital are expected next year.

Away from banking, 2026 promises to be a busy year on the prudential side for other types of entities. For example, the FCA is expected to publish all cryptoasset policy statements and final rules and this will include finalising the prudential regime. For investment firms the FCA will continue to probe compliance with the Investment Firm Prudential Regime (IFPR) which will be four years old come January 1, 2026. The key development in 2026 is that, whilst overall capital levels remain unchanged, the FCA has simplified how investment firms calculate their capital. From April 1, 2026, firms will need to notify the FCA "as soon as reasonably practicable" when including interim profits in their Common Equity Tier 1 (CET1) capital. However, the verification standards for these profits remain unchanged, requiring independent verification. Regulatory reporting will also continue to be an important theme, not only in relation to this change but also with the FCA building on its recent review on data quality of prudential regulatory reporting of MIFIDPRU investment firms. 

8. Fintech and Payments

It has been another significant year in Fintech regulation, with some long-awaited consultations having been published at various points throughout the year and with more to come as we approach 2026. In November 2025, the Bank of England (BoE) published a consultation paper setting out its proposed framework for a regulatory regime for sterling-denominated systemic stablecoins. The BoE is seeking feedback on these proposals until February 10, 2026 but made clear that this consultation paper is not intended to provide detailed implementation requirements but to clarify policy positions and set the groundwork for future phases of work, including codes of practice, which it intends to consult on next year. In addition, also in 2026, the BoE and FCA intend to jointly consult on the detailed design of the regulatory framework focussing on how authorities’ remits will apply in practice.

Other significant developments have related to establishing a framework for the regulation of Cryptoassets. Earlier in the year, in April, HMT published a draft statutory instrument, intended to create new regulated activities in relation to cryptoassets. In addition, HMT had confirmed in its related policy note that statutory provisions for the market abuse and admissions and disclosures regimes would be published “in due course”. On December 15, 2025, HMT announced that it had laid the Financial Services and Markets Act 2000 (Cryptoassets) Regulations 2025. The Regulations will establish new regulated activities for cryptoassets, such as operating a cryptoasset trading platform and issuing stablecoins. Further, the Regulations now also include details of new regimes in relation to admissions and disclosures, and market abuse. Subsequently, on 16 December, the FCA published three related consultation papers setting out: (1) proposed rules and guidance for firms conducting regulated cryptoasset activities such as trading platforms, intermediaries (including cryptoasset lending and borrowing), staking and decentralised finance; (2) the regulation of cryptoassets in relation to admissions, disclosures, and the market abuse regime; (3) further proposals for new prudential rules for all cryptoasset firms that will need FCA authorisation. The deadline for feedback fhas been set as February 12, 2026. These papers follow the prior consultation papers published by the FCA earlier in the year, in May 2025, in relation to both stablecoin issues and cryptoasset custody and initial proposals for prudential requirements. Later, in September 2025, the FCA also published a further consultation paper on the proposed application of existing FCA Handbook rules to firms conducting regulated cryptoasset activities. Those prior consultations have now closed and the FCA has explained that finalised rules in relation to each of these consultations will be set out in policy statements in 2026, as per its Crypto Roadmap. Finally, the FCA has also reconfirmed in its recent consultation papers that further consultations in relation to the application of the Consumer Duty, Conduct of Business Sourcebook (COBS) and access to the Financial Ombudsman Service, can also be expected to be published in early 2026. Taken together, it is therefore expected that during 2026 the framework for the regulation of Cryptoasset firms will hopefully become clearer. We also expect to see an uptick in regulatory intervention and enforcement activity in connection with cryptoassets next year and it has been reported that the FCA has this year established a dedicated team of staff focused on crypto enforcement.

While there has arguably been less concrete progress in terms of setting a direction for any future regulation of AI, the FCA has gone further in 2025 in terms of setting out its approach, including some indications as to how this might be relevant already under existing rules and how AI is helping the FCA to become a ‘smarter regulator’, and so we can perhaps expect to hear more on this next year. More specifically, the FCA is continuing to engage with firms such as through its live testing initiative launched in Autumn this year and has committed to publishing an evaluation report into this programme at the end of the 12-month process towards the end of 2026.

More broadly, in July 2025, HMT also published a policy paper setting out its wholesale financial markets digital strategy, which sought to set out concrete steps in relation to market to optimisation, transformation and leadership. For example, on optimisation, the UK digitisation taskforce report recommended the removal of paper share certificates, which the government has committed to moving forward with between now and 2027. On transformation, the Government is also moving forward with the issuance of the UK’s digital gilt instrument (DIGIT) and the FCA confirmed in a recent consultation paper that it considers that funds ought to able to invest in this as an eligible asset, and the BoE and FCA are also still working jointly on the Digital Securities Sandbox giving firms the opportunity to explore innovation safely, which is currently intended to be open for applications until March 2027 and will remain operational until the end of 2028 with the possibility of a further extension by Government. And on leadership, the Government has set out that it intends to appoint a digital markets champion and is in the process of identifying a suitable candidate to take this role. 

Finally, in relation to payments regulation, the Payments Vision Delivery Committee (the Committee), established as part of the implementation of the Government’s National Payments Vision, recently published a policy paper on the future of UK retail payments infrastructure setting out five strategic outcomes, such as giving consumers a greater choice of innovative payments options and ensuring that consumers trust their payments are protected. The paper makes clear that HMT, the BoE, FCA and PRA will coordinate during 2026 and over the next few years to achieve the outcomes identified. In particular, a deliverable of the Committee is to publish the Payments Forward Plan, which will set out a sequenced plan of initiatives including in relation to both retail and wholesale payments, and certain aspects of digital assets, and this is expected to be published in early 2026.

9. Asset Management

For 2026, asset managers will confront a challenging macroeconomic backdrop including geopolitical uncertainty, shifting regulatory regimes, heightened competitive pressures, and the continued maturation of ESG investing. The rapid diffusion of AI will also be a defining force, reshaping both investment approaches and disclosures and streamlining operational performance.

As regards the UK regulatory regime, a new prospectus regime comes into force in January 2026, requiring firms to comply with new forms and checklists. At the end of 2026 the temporary marketing permissions regime for EEA investment funds ends. But perhaps the biggest story for the asset management sector will happen somewhere in between with HMT and the FCA following up on their work to replace the UK’s implementation of the EU Alternative Investment Fund Managers Directive (AIFMD) as part of the Government's work to repeal retained EU law relating to financial services.

HMT has consulted on removing the legislative thresholds for small regimes which will allow the FCA to recalibrate their rules for alternative investment fund managers (AIFMs) of all sizes having regard to their investment activities and investor base, as well as the specific risks they pose. As part of this the FCA has already issued a call for input regarding proposals to simplify its rules in several areas of the UK AIFMD regime. This includes adjusting the thresholds for regulatory requirements and leverage. The FCA believes that there is no immediate need to make radical changes to how asset safekeeping and fund oversight should be carried out for large and mid-size AIFMs but it has still asked for input from stakeholders on whether they would like it to explore proportionate alternatives that meet global regulatory standards. It is also worth noting that the call for input did not address at length various other important issues that the FCA is considering, and this includes prudential rules for AIFMs, regulatory reporting under the UK AIFMD, requirements for AIFMs around disclosure, distribution and marketing to retail investors and remuneration requirements for AIFMs. We can expect to see more on these topics in 2026.

On the remuneration side following changes to the dual-regulated firms’ Remuneration Code, the FCA is reviewing the operation and effectiveness of its solo remuneration rules for alternative fund managers (the AIFM Remuneration Code), UCITS management companies (the UCITS Remuneration Code) and investment firms (the MIFIDPRU Remuneration Code). The FCA is engaging stakeholders to understand the value and costs of these rules. Sometime in April to June 2026 we can expect to see a progress report.

And finally, fund tokenisation will be another important reform in 2026. The FCA will follow up on its consultation, CP25/28, which set out proposals to encourage the adoption of tokenisation and tokenised funds in the UK. The FCA proposed a technology neutral approach that included guidance for operating a tokenised fund under the model set out in the November 2023 blueprint report by the Technology Working Group of the Asset Management Taskforce, rules and guidance for an alternative, streamlined dealing model for conventional and tokenised authorised funds, referred to as "direct-to-fund" and a roadmap to advance fund tokenisation and address key barriers. As part of the proposals, the FCA also considered what regulatory changes may be needed in the future to promote fund tokenisation, such as the use of digital cash settlement instruments or money-like instruments (for example, stablecoins) for unit deals. It also considered a future vision where firms use distributed ledger technology to support retail-scale portfolio management services, including via model portfolios. The FCA intends to conduct a review to future-proof the portfolio management services rules, where tokenisation may lead to a far greater use.

Of note, we have seen a number of enforcement cases in the asset management sector this year, reminding firms that compliance and risk are first line issues, as well as the importance of governance including proper conflict management.  

10. Markets reforms

The Government’s growth and competitiveness strategy  emphasised the importance of the ongoing reform of the UK’s capital markets to the wider UK economy, and the FCA set out in its concurrent statement on market reforms that there is more to come in this area, focussed on building a stronger retail investment culture in the UK and encouraging the democratisation of retail investment, which links with other proposals mentioned above in relation to clarifying the scope of the consumer duty, finalising the rules on targeted support and the introduction of the new regime in relation to CCIs. As part of this wider package of reforms, the FCA also published two of the proposals promised in its prior statement on market reforms: (1) a consultation on proposed changes to its client categorisation rules, with a view to this new framework creating a clearer distinction between professional clients and retail customers, to allow firms to confidently operate with professional clients who don’t need retail protections; and, (2) a discussion paper seeking views from industry on what more the FCA can do to ensure its regulations help consumers take informed risks and equip them with the confidence to invest. Furthermore, the FCA have also previously set out that it is conducting a review of the securitisation rules to identify possible areas where they could be simplified or where there are barriers to issuing and investing and the FCA and PRA have confirmed that they are aiming to publish a consultation paper in relation to this early next year. As a result, it appears that into 2026 firms will hopefully have greater clarity as to where they may be able to expand their offerings. 

More broadly in relation to markets reforms, in June 2025, the FCA introduced PISCES, a new private stock market enabling investors to buy stakes in growth companies, with firms now able to apply to the FCA should they wish to operate a PISCES platform. In addition, following this, in July 2025 the FCA also confirmed its final rules to implement the new Public Offers and Admissions to Trading Regulations 2024 (POATRs), intended to make it easier for companies to raise capital in the UK and reduce costs when admitting securities to UK public markets, with the POTARs regime coming into effect on January 19, 2026. Progress is also being made in relation to a new proposed framework for introducing an equity Consolidated Tape in the UK, on which the FCA is consulting, with feedback due to the regulator by the end of January 2026. Finally, in relation to T + 1 settlement, HMT published a draft of the Central Securities Depositories (Amendment) (Intended Settlement Date) Regulations 2026, alongside an updated policy note, in November intended to mandate T+1 settlement in the UK. HMT has made clear that it will consider any technical feedback provided on the draft SI by February 27, 2026, which is currently scheduled to come into force on October 11, 2027. Therefore, it appears that firms will likely want to be ready to adapt to these broad changes to the UK capital markets framework during 2026. In addition, in relation to operational resilience, in late 2024 the FCA, PRA and BoE published consultation papers on incident and outsourcing and third-party reporting. The relevant regulators have been considering feedback in relation to these proposals and have recently reconfirmed that final rules can be expected to be published in the first half of 2026, hopefully giving firms clarity during the course of next year on the extent they may need to implement any DORA type obligations in the UK.

Alongside this, the Government has also emphasised the importance of financial market infrastructure. In the summer, initial consultations were published that focussed on the regulatory framework for central counterparties. Under the proposals so far, it appears that significant parts of the current regulatory regime will be retained for now, but the papers published by the BoE do set out some policy changes. These consultations closed in late November 2025 and so, depending on the detail of the final changes, it is expected that there will be a more proportionate regulatory framework for CCPs brought into force during next year, although the BoE has set out that the final rules will be published no earlier than the end of the first half of next year with a likely implementation period of six months.

Finally, as part of its commitment to wider reforms in this area, the Government has also recently announced its intention to make permanent certain intragroup exemption frameworks for over-the-counter derivatives, currently enabled under the UK’s Temporary Intragroup Exemption Regime (TIGER), and published a draft statutory instrument for technical comment, alongside which the FCA also published a consultation paper setting out proposals intended to streamline the regime. Consultations on these measures are due to close early next year with changes expected to be brought into force during the second half of next year before the expiry of TIGER at the end of 2026.

11. Enforcement developments

In addition to the enforcement action referenced above in the context of particular areas, there have also been a number of process developments which are likely to have an ongoing impact on the industry in 2026. The FCA has been continuing to evolve its enforcement approach with the aim of conducting fewer investigations, faster. In 2023, it had 220 open enforcement investigations. As at the start of October, it had 124. We are also seeing investigations being closed on tighter timelines: seven recent investigations achieved a public outcome in 16 months or less, compared to a previous average of 42 months. However, it remains the case that increased speed in investigations is often achieved through firms opting for a quick settlement and anecdotally, many investigations are still slow moving with months passing between communications from the regulator.

We are also seeing the FCA continue to use formal supervisory tools in response to misconduct concerns and firms are likely to continue to experience the ‘strong arm of the supervisor’ going into 2026, which can feel fairly akin to enforcement, particularly in the case of businesses limiting requirements or intrusive skilled person reviews. Following a decision by the Court of Appeal, we have seen the FCA using its powers to impose a redress scheme on a single firm, and firms have also received large fines for breaching requirements imposed, demonstrating the importance of devoting adequate resources to compliance with regulatory requirements and ensuring good governance arrangements are in place to deliver on regulator expectations. 

In June 2025, the FCA published the updated version of its Enforcement Guide. Of particular note from this, in what many saw as a rare success story for industry push-back, the FCA dropped its original proposal to adopt a public interest test for naming firms when opening an enforcement investigation. Instead, the FCA opted to retain the “exceptional circumstances” test for announcing an investigation but added three additional instances where announcements could be made. These enable the FCA, in limited circumstances, to announce and name the subjects of investigations into suspected unauthorised activity or criminal offences related to unregulated activity, reactively confirm that it is investigating in specific circumstances and share information on an anonymised basis.

The FCA is now putting this new policy into practice: a currently unnamed firm recently lost a High Court challenge to prevent the FCA announcing it is under investigation and is appealing and it is now possible to view enforcement investigation announcements in one place on the FCA’s website, with a filter having been added. The FCA’s move signals a continued focus on transparency, governance, accuracy of disclosures and compliance culture and firms should expect greater scrutiny of internal controls including disclosure verification and reporting processes.

The FCA has been clear that it expects firms to hold themselves to high standards: recognising when something has gone wrong; taking responsibility for it; and taking the necessary steps to fix things. This includes paying redress to anyone harmed and in the last financial year, the FCA secured over £442 million for investors and consumers through redress schemes, settlements and civil proceedings. Where issues do arise for firms in the year to come the FCA will expect them to take responsibility and resolve such issues early; in order to avoid requirements and/ or enforcement referrals and we expect to see a continuing focus on consumer redress.