Welcome to the July 2026 edition of our Investment Firms Newsletter.
Recent regulatory publications continue to point towards a supervisory agenda focused on resilience, market transparency, controlled innovation, technology governance, proportionate conduct regulation and financial crime controls.
The developments below are particularly relevant to UK asset managers, investment firms and appointed representatives.
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UNITED KINGDOM.
Consumer Duty: Scope and Proportionality
On 29 June 2026, the FCA published CP26/23 on the scope and proportionality of the Consumer Duty. The consultation proposes targeted changes intended to clarify where the Duty applies and where it does not, including in relation to non-UK customers, distribution chains and the interaction between the Consumer Duty and other product governance rules.
Firms should consider whether the proposals affect their target market analysis, distribution arrangements, product governance, fair value assessments, consumer understanding, intermediary oversight and cross-border client arrangements. Wholesale firms should also consider whether their current approach over-applies the Duty in areas that the FCA is seeking to clarify, while ensuring that retail customer outcomes remain properly evidenced where retail clients are within scope. The consultation closes on 18 September 2026.
Liquidity and Resilience remain central supervisory themes
The FCA published an update on reform of the UK Money Market Fund regime on 8 June 2026. The update follows the Government's intention to replace the current UK Money Market Funds (“MMFs”) Regulation and confirms the FCA's next steps in issuing rules and guidance for MMFs.
The relevance for asset managers is not confined to firms that operate MMFs. MMFs remain an important cash management and liquidity tool for institutional investors, and the FCA's update reinforces the broader regulatory focus on liquidity management, redemption risk and fund resilience. Firms using MMFs as part of treasury, collateral or wider liquidity arrangements should consider whether governance and reporting arrangements remain appropriate.
Bank of England and Private Markets
The Bank of England's publication of the private markets system-wide exploratory scenario on 19 June 2026 is a further indication of regulatory focus on resilience beyond the banking sector. The scenario is designed to explore how stress could be transmitted through private markets and how the behaviour of banks and non-banks might react to a severe market stress.
The Bank of England will publish initial and interim findings in the July and Financial Stability Report and later in 2026 respectively, with a final report expected in 2027. The guidance supports a whole-firm approach, involving technology, risk, compliance and senior management rather than treating AI as a purely technical issue. Firms should consider whether policies, risk assessments, incident response plans and third-party oversight arrangements adequately address frontier AI risk.
Market transparency and fixed income infrasturcture
The FCA's announcement on 22 June 2026 of the launch of the UK bond consolidated tape is an important development in UK wholesale market infrastructure. The FCA stated that the tape gives market participants a single, real-time source of UK bond market trading activity.
For asset managers, the development is relevant to best execution, transaction cost analysis, fixed income trading oversight, market data strategy and valuation support. Although the launch does not by itself impose a new conduct obligation, it may change what is reasonably available to firms when assessing execution quality and market transparency.
Market Structure Reform continues
June also saw progress in the UK's post-Brexit market reform programme through commencement regulations made under the Financial Services and Markets Act 2023. The Financial Services and Markets Act 2023 (Commencement No. 14) Regulations 2026, made on 3 June 2026, bring into force provisions enabling the replacement of the retained EU Short Selling Regulation with a new UK framework.
The reforms form part of the Government's wider programme to transfer detailed requirements from retained EU legislation into the FCA Handbook. Although many of the practical obligations will be implemented through subsequent FCA rules, the commencement regulations represent an important milestone in establishing the UK's standalone short selling regime.
For asset managers, particularly firms operating hedge fund, long/short equity and alternative investment strategies, the reforms are significant. Firms should monitor forthcoming FCA rulemaking closely and consider the implications for governance, reporting processes, securities lending arrangements, prime brokerage relationships and cross-border compliance where trading activity spans both UK and EU markets. As the UK and EU regimes continue to diverge, firms operating internationally should assess whether existing compliance frameworks adequately capture differences in reporting thresholds and operational requirements.
Closed Ended Investment Funds: proposed changes to the UK Listing Rules
On 26 June 2026, the FCA published CP26/21 on proposed changes to the UK Listing Rules for closed-ended investment funds. CP26/21 focuses on the management of conflicts of interest and the consistent application of shareholder protections.
The proposals are relevant to listed closed-ended funds, their boards, investment managers, substantial shareholders, sponsors and investors. For asset managers, the consultation is particularly important where a manager, proposed manager or substantial shareholder may have interests that require careful governance. Firms should consider the implications for board independence, related party processes, changes to investment management arrangements, fee changes, shareholder communications and sponsor engagement. The consultation closes on 14 August 2026.
Certification Regime: removal of duplicate functions from the directory
The FCA has confirmed that changes to the Directory to remove multiple overlapping Certification Regime functions will take place on 30 July 2026, with related regulatory reporting and process improvements applying from 10 July 2026.
For investment firms, this is an operational implementation point rather than a change to the underlying accountability framework. Firms should ensure HR, compliance and regulatory reporting teams understand the timing, check whether internal records and Directory Persons data remain consistent, and update procedures where they currently refer to overlapping certification functions. The change should not be treated as reducing the need to assess certified staff as fit and proper.
Financial Crime and High-Risk Third Countries
HM Treasury updated its Money Laundering Advisory Notice in June 2026 following changes to the Financial Action Task Force lists. The notice reminds regulated firms of the enhanced due diligence and enhanced ongoing monitoring requirements that apply in relation to high-risk third countries under the Money Laundering Regulations.
For asset managers, the practical relevance is in investor onboarding, counterparty due diligence, beneficial ownership checks, jurisdiction risk assessments and ongoing monitoring. Firms should ensure that financial crime controls reflect the updated country lists and that any changes are incorporated into relevant policies and procedures.
HM Treasury also published its response on AML/CTF supervision reform in June 2026. The response follows the Government's decision to make the FCA the AML/CTF supervisor for legal and accountancy service providers and trust and company service providers.
This is not an asset-management-specific reform. However, it is relevant to the wider financial crime supervision environment and may be of interest to firms that rely on professional services providers, trust and company service providers, introducers or other intermediaries as part of their operating model.
Sanctions Systems and Controls
The FCA's report on sanctions systems and controls, published on 28 May 2026, is relevant to all FCA-authorised and registered firms and is particularly relevant to MLROs, nominated officers and financial crime compliance teams. The FCA reviewed firms' financial and trade sanctions controls and set out examples of good and poor practice.
Investment firms should read the findings against their own operating model. Areas to consider include sanctions risk assessments, governance and management information, customer and counterparty screening, list management and data feeds, calibration and testing of screening tools, alert management, escalation, breach assessment and reporting.
Asset managers should also consider investor due diligence, intermediated distribution, portfolio counterparties, issuers, custodians, administrators and outsourced screening arrangements. Where reliance is placed on third-party systems or service providers, firms should be able to evidence oversight, assurance testing and clear ownership of sanctions risk. Firms should also check whether sanctions risks are properly reflected in business-wide risk assessments, product and jurisdiction risk assessments, onboarding procedures, ongoing monitoring, staff training and senior management reporting.
Technology Governance and Emerging Risks
On 10 June 2026, the FCA published its Emerging Technology Horizon Scan 2026.The FCA identifies themes including artificial intelligence, synthetic identity and programmable finance which could pose future risks for consumers, firms and markets.
For asset managers, the immediate relevance is governance rather than new rulemaking. Firms using AI-enabled investment tools, automated client journeys, outsourced technology infrastructure, digital operational processes or advanced analytics should consider whether existing governance frameworks adequately address model risk, data quality, operational dependency, cyber risk and senior management accountability.
Frontier AI and Operational Resilience
The FCA's operational resilience webpage was updated in June 2026 to point firms to industry led CMORG guidance on frontier AI. CMORG, which is co-chaired by the Bank of England and UK Finance with the FCA as a member, has produced guidance on the cyber and operational resilience implications of frontier AI models.
This is relevant to investment firms as AI-related risk is not limited to client-facing tools or investment decision-making. Frontier AI may affect software development, vulnerability discovery, cyber threat capability, vendor management, data leakage risk and incident response. Firms using, procuring or permitting access to advanced AI tools should assess whether their operational resilience, cyber security, outsourcing, model governance and board reporting arrangements remain adequate.
The guidance supports a whole-firm approach, involving technology, risk, compliance and senior management rather than treating AI as a purely technical issue. Firms should consider whether policies, risk assessments, incident response plans and third-party oversight arrangements adequately address frontier AI risk.
FCA Quarterly Consultation Paper No.52
Within the FCA's Quarterly Consultation Paper No. 52, CP26/17, published on 5 June 2026, covered the following various topics including:
1. Proposals to simplfiy climate disclosures for investment products
The proposals would replace detailed product-level Taskforce on Climate-related Financial Disclosures (“TCFD”) style reports with more targeted information for retail investors. Firms in scope should consider whether existing reporting processes are proportionate, whether client-facing information is understandable and how any changes would interact with SDR, naming and marketing requirements and Consumer Duty communications standards. The consultation closes on 13 July 2026.
2. Proposals to allow certain authorised funds to obtain limited exposure to cryptoasset exchange traded notes, subject to a 10% limit
Whilst the FCA’s cryptoasset exchange traded notes is narrow, it reflects the FCA's willingness to permit limited product innovation within existing authorised fund structures rather than through a wholly separate regime. Authorised fund managers considering this type of exposure would need to review investment powers, disclosure, valuation, product governance, risk management and operational readiness before incorporating it into a fund strategy.
3. Annual fees and levies for cryptoasset firms
The FCA has confirmed that fee-block A.26 will be created for firms undertaking cryptoasset activities. Under the proposals, firms receiving more than £100,000 in regulated annual income will pay a variable fee, in addition to the minimum fee of £2,000 (which all firms with less than £100,000 regulated annual income must pay).
4. Updated Appointed Representatives data
The FCA published updated Appointed Representatives data on 5 June 2026. The data covers the principal and AR population and financial services activity, including revenue generated from regulated and non-regulated activity.
This is a useful supervisory signal for principal firms and firms considering AR or introducer arrangements. Investment firms should continue to ensure that AR governance, onboarding, oversight, revenue monitoring, complaints information and termination processes are properly documented and supported by accurate regulatory submissions.
UNITED STATES.
The US Governement suspended access to Anthropic's Fable 5 and Myhtos 5 models by Foreign Nationals in June 2026
The suspension was on the grounds of national security concerns. The action may signal a more active role in the oversight of AI from US authorities, including the SEC so investment advisers should take note. Stronger regulation of AI in the US is likely to result in more regulatory interventions, requiring a close focus on AI governance. Concerns continue to be voiced regarding AI-related national security and cyber risks. Firms should be mindful of the developments and consider the robustness of their existing controls and governance arrangements relating to their use of AI.
The SEC publishes its Chairman's vision for the next four years, strategic plan ("The Plan")
The Plan aims to refocus the Commission on its core mission of protecting investors, maintaining fair and efficient markets, and supporting capital growth through greater clarity of the regulations and U.S. competitiveness.
The rapid growth in blockchain and cryptoasset technologies has outpaced the existing US regulatory framework. The Plan is to provide a clear and consistent approach for legal certainty and clarity for innovators while protecting investors and preserving market integrity. The SEC will review existing regulations and evaluating the agency's administrative law framework. The Plan proposes modernising legacy systems such as EDGAR, adopting secure and scalable technology in which to improve data integrity and reduce operational risk. The public comment period closes on July 2, 2026.
SEC charges 21 individuals with alledged wide-reaching Insider Trading Scheme
SEC charged 21 individuals for their alleged involvement in a decade-long insider trading scheme that used information misappropriated from multiple global law firms and resulted in millions of dollars in illicit profits. The SEC alleges that several participants agreed to provide a portion of their trading profits back to the original tippers in exchange for access to confidential information. Other recipients allegedly passed the information to additional traders, creating a broad tipping network involving family members, friends, and business associates.
