Welcome to the October 2026 edition of our Investment Firms Newsletter.
September saw significant regulatory activity affecting investment firms across the UK, EU and US. Digital assets and tokenisation remained prominent themes, alongside reforms to transaction and fund reporting, remuneration, alternative investment fund regulation, sustainability disclosures, operational resilience, private markets and investment adviser regulation.
Firms should review the developments relevant to their business models and ensure regulatory change programmes, governance arrangements and implementation plans remain aligned with forthcoming deadlines and supervisory expectations.
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UNITED KINGDOM.
Cryptoasset Perimeter Guidance – PS26/18
The FCA has published PS26/18: Cryptoasset Perimeter Guidance, setting out its final guidance on how the UK's new cryptoasset regulatory perimeter will apply. The new regime will come into force on 25 October 2027 and will bring activities including operating cryptoasset trading platforms, dealing and arranging deals in cryptoassets, safeguarding cryptoassets, arranging staking and certain activities involving qualifying stablecoins within FCA regulation.
The guidance is intended to help firms determine whether their business models fall within the new perimeter and what permissions will be required. It is relevant not only to existing cryptoasset businesses, but also to FCA-authorised investment firms and asset managers exploring digital assets, firms registered under the Money Laundering Regulations and overseas businesses providing relevant services into the UK. Existing FCA permissions and MLR registrations will not automatically convert into permissions under the new regime.
The application window opened on 30 September 2026 and closes on 28 February 2027 for firms seeking to use the transitional arrangements. Firms planning to operate within the regime should therefore be progressing their regulatory readiness, including assessments of permissions, governance, financial crime controls, prudential requirements, operational resilience and, where applicable, safeguarding and custody arrangements.
Direction SET for Wholesale Market Tokenisation
The FCA has published a feedback statement FS26/1: Tokenisation in Wholesale Markets, setting out feedback to the joint FCA and Bank of England Call for Input on tokenisation in UK wholesale financial markets. The authorities received 123 responses from firms, industry bodies and legal academics, with broad support for the development of tokenised market infrastructure.
Post-trade activity was identified as one of the areas with the greatest potential, particularly collateral management, where tokenised assets could enable faster and more efficient movement of collateral between market participants. Respondents also highlighted issues concerning settlement, custody, interoperability, legal certainty and the interaction between tokenised assets and established financial market infrastructure.
The FCA and Bank of England intend to publish a joint tokenisation roadmap setting out the next stages and target dates for their work. For investment firms and asset managers developing tokenised securities, funds or collateral arrangements, the publication reinforces the need to consider legal ownership, custody, settlement, governance and operational resilience alongside the technology itself.
Next Phase of UK Capital Markets Reform
The FCA has drawn together a number of its current policy initiatives in its speech on reforming UK capital markets. The programme spans tokenisation, asset management reform, MiFID organisational requirements, AIFM reform, fund liquidity management, changes to the Senior Managers and Certification Regime and reforms intended to improve access to investment support.
The broader direction is towards a less prescriptive and more outcomes-focused regulatory framework, coupled with greater use of technology and regulatory data. The FCA's recent reforms increasingly seek to distinguish between requirements that provide meaningful investor or market protection and those that generate cost or complexity without a proportionate regulatory benefit.
For investment firms and asset managers, simplification should not be interpreted as lower supervisory expectations. Governance, accountability, market integrity and the ability to demonstrate that systems and controls operate effectively in practice remain central themes, even as some detailed rules and reporting requirements are streamlined.
The New Transaction Reporting Regime – CP26/34
The FCA has published CP26/34: Preparing for the new transaction reporting regime, consulting on guidance, transitional provisions and consequential amendments intended to help firms implement the revised UK transaction reporting framework. The consultation closes on 6 November 2026 and the new regime will take effect on 3 April 2028.
The changes already finalised include a reduction in the number of transaction reporting fields, amendments to the scope of instruments that need to be reported and simplification of elements of the remediation framework. CP26/34 addresses the practical implementation of those reforms, including transitional provisions, consequential Handbook and Technical Standards changes and the proposed migration of relevant Level 3 material into a new Transaction Reporting User Pack.
The FCA has also released draft reporting schemas and validation rules so firms and technology providers can begin systems work ahead of implementation. Investment firms should now assess the impact on reporting logic, data sourcing and mapping, controls, exception management and arrangements with Approved Reporting Mechanisms and technology providers rather than treating the 2028 implementation date as a reason to defer planning.
Major Remuneration Reform for Solo-Regulated Firms
The consultation period for CP26/27: Remuneration – Solo-regulated firms' rules reform closed on 16 September 2026. The proposals are directly relevant to MIFIDPRU investment firms, AIFMs and UCITS management companies and would replace the three existing remuneration codes with a single consolidated regime.
The FCA intends to move away from some of the more detailed and prescriptive elements of the current framework towards an outcomes-focused approach placing greater reliance on governance, management-body judgement, proportionality and accountability. The reforms respond to concerns that the existing regime can be complex and disproportionately burdensome, particularly for firms that do not create significant systemic risk.
Investment firms and asset managers may still need to undertake a substantial review of remuneration policies even if the overall compliance burden falls. Firms should consider how remuneration governance, risk adjustment, variable remuneration and decision-making would operate under the proposed framework, with a policy statement expected in Q1 2027.
Reform of the UK AIFM Regime
The FCA's CP26/28 consultation on reform of the UK AIFM regime proposes a more proportionate framework for UK alternative investment fund managers. The reforms are relevant to authorised and registered AIFMs, firms marketing AIFs in the UK, depositaries, prime brokers and delegates, as well as UCITS management companies in relation to certain prudential elements.
The FCA's objective is to move away from a relatively uniform framework and apply requirements more proportionately according to a firm's size, activities and risk profile. The main consultation and the discussion chapter on prudential reforms closes on 22 October 2026, while the deadline for the other discussion chapters is 18 September 2026.
For AIFMs, the reforms could affect regulatory classification, governance, reporting and prudential requirements. Firms should therefore consider the AIFM proposals together with the remuneration reforms and wider changes to fund reporting, as these workstreams are likely to interact when the new framework is implemented.
Frontier AI and Cyber Resilience
The FCA has published its multi-firm review on frontier AI and cyber resilience, examining how advanced AI models may affect firms' cyber risk and operational resilience. The FCA considers that frontier models can materially improve the speed at which vulnerabilities are identified, validated and prioritised.
However, firms' ability to remediate vulnerabilities may not increase at the same pace as their ability to discover them. This could expose weaknesses in existing vulnerability-management processes, access controls, governance, risk ownership and dependency management, particularly where firms increasingly rely on advanced technology providers.
The review does not create new regulatory requirements, but it provides a clear indication of the FCA's supervisory thinking. Investment firms and asset managers should consider whether cyber and operational resilience frameworks remain appropriate as AI is deployed internally or by critical third parties, and whether senior management has sufficient visibility of the resulting risk profile.
Non-Financial Misconduct Rules Now in Force
Climate Reporting for Asset Managers
Quarterly Consultation Paper 53 – Fractional Shares and Crypto Transition
EUROPEAN UNION.
EU Retail Investment Strategy moves into detailed rulemaking – EU MiFID firms, UCITS managers and AIFMs
ESMA published the European Commission’s request for technical advice on implementing amendments under MiFID II, UCITS and AIFMD. The mandate covers value-for-money and product-governance processes, product peer groups, costs and performance, inducements, suitability and appropriateness, simplified advice, marketing through digital channels and third parties, and controls for identifying and reimbursing undue fund costs. The request is part of the continuing legislative and Level 2 process and does not itself create final operational requirements.
EU facing firms should begin a proportionate readiness assessment rather than implementing unfinalised rules. Priority areas include product-cost and performance data, potential peer-group comparisons, inducement inventories, suitability journeys, marketing approvals, written arrangements with promoters or financial influencers, records of digital communications, and governance for identifying and reimbursing undue costs.
New EU best-execution standards reach their August legal milestone
Commission Delegated Regulation (EU) 2026/825 entered into force on 12 August and will apply 18 months after entry into force. The Regulation establishes more detailed criteria for preparing and assessing order-execution policies, including the categorisation of financial instruments, selection and monitoring of execution venues, the use of reliable market and reference data, and fair-price checks for over-the-counter and bespoke instruments. It will replace the existing RTS 27 and RTS 28 delegated regulations when it becomes applicable.
European Supervisory Authorities propose bilateral-margin simplification – EU derivatives counterparties
On 3 August, the European Supervisory Authorities published draft amendments to the bilateral-margin requirements under EMIR. The proposal would remove the obligation to exchange initial margin on both new and existing contracts where counterparties are within the initial-margin regime but fall below the €8 billion threshold. Under the current rules, the exemption applies to new contracts but can leave legacy contracts subject to margin exchange. The draft must still be considered by the European Commission and is not yet applicable law.
UNITED STATES.
SEC private-fund case highlights principal transactions, fees and registration – US facing private-fund advisers
On 10 August, the SEC charged Adit Ventures Management, its chief executive and affiliated general partners in connection with alleged misconduct involving pre-IPO investments. The SEC alleged, among other matters, unauthorised loans involving fund assets, purchases followed by sales to funds at higher prices without appropriate principal-transaction consent, misleading statements about acquisition cost, unauthorised fees, pledging client assets to support a credit facility and failure to register as an investment adviser. The defendants consented to a proposed judgment, subject to court approval, without admitting or denying the allegations.
SEC and CFTC extend the Form PF compliance date – SEC-registered private-fund advisers
On 31 August, the SEC and CFTC adopted a joint final rule extending the compliance date for the 2024 Form PF amendments from 1 October 2026 to 1 July 2027. The extension applies to advisers that would be required to file under the amended form, including relevant advisers also registered as commodity pool operators or commodity trading advisers. Firms may continue using the current Form PF while the agencies consider separately proposed 2026 changes that could further streamline the reporting framework.
Affected managers should update project plans, budgets and vendor delivery dates, but should not dismantle implementation work already completed. The additional period should be used to improve data ownership, lineage, aggregation, reconciliation and control testing, while maintaining scenario plans for both the adopted 2024 amendments and any subsequent changes arising from the 2026 proposal.
SEC Proposes New Regulation Crypto Assets
August 2026, the SEC has proposed a tailored framework for crypto-related investment contracts that aims to support US innovation and capital raising while maintaining investor protections. Key proposals include:
- A one-time registration exemption for offerings of up to $5 million over four years.
- A second exemption allowing offerings of up to $75 million in any 12-month period, with financial statements and ongoing reporting required.
- Principles-based disclosures to investors under both exemptions.
- A conditional safe harbour under which a crypto asset would no longer be treated as subject to an investment contract once the issuer completes or permanently stops its promised essential managerial work.
- Federal pre-emption of certain state securities registration requirements, including for qualifying offerings and some secondary-market transactions.
The proposal builds on the SEC's March 2026 guidance and is intended to clarify when crypto assets are governed by federal securities laws, encourage issuers to operate in the US rather than offshore, and provide stronger, consistent investor protections. The public comment period lasts 60 days after the proposal is published in the Federal Register.
CFTC Proposed to Codify Commodity Pool Operator Registration Relief for SEC-Registered Investment Advisers
On August 18, 2026, the U.S. Commodity Futures Trading Commission (CFTC) approved a notice of proposed rulemaking (the Proposal) that would amend part 4 of the CFTC’s regulations to:
- Reinstate the commodity pool operator (CPO) registration exemption under CFTC Rule 4.13(a)(4) (the Proposed RIA-QEP Exemption) for certain investment advisers registered with the Securities and Exchange Commission (SEC) (RIAs), substantively codifying CFTC No-Action Letter 25-502 (Letter 25-50 or the Letter), with important modifications.
- Restore the related exemption from commodity trading advisor (CTA) registration under CFTC Rule 4.14(a)(8) for advisors to pools operated pursuant to CFTC Rule 4.13(a)(4).
- Increase the aggregate gross capital contributions threshold in the CPO registration exemption for small commodity pools under CFTC Rule 4.13(a)(2) (the Small Pool Exemption) from $400,000 to $800,000.
The primary beneficiaries of the Proposal will be SEC-registered private-fund advisers whose client base consists of “qualified eligible persons” (QEPs), and whose commodity interest trading activity exceeds the CFTC Rule 4.13(a)(3) de minimis exemption thresholds or whose investment strategy otherwise makes them ineligible to claim an exemption under CFTC Rule 4.13(a)(3).
CPO registration exemption under CFTC Rule 4.13(a)(4) that could be claimed for each “Eligible Pool” if:
- the person claiming the exemption is registered with the SEC as an investment adviser under the Investment Advisers Act of 1940;
- the pool interests are exempt from registration under the Securities Act of 1933 and are offered and sold without marketing to the public in the United States, except that the public-marketing restriction would not apply to a pool also offered under SEC Rule 506(c);
- the person reasonably believes, at the time of investment, or, for an existing pool, when the pool converts to exempt status, that each participant is an “Eligible Participant,” as described below; and
- the person files Form PF for the pool, if applicable regulations require that filing.
The Proposal was published in the Federal Register on August 21, 2026.
