Investment management update - January 2026

Market risk capital requirements: on 16 December 2025, the FCA published an engagement paper to introduce its review of the market risk capital requirements for specialised investment firms (as announced in the Government’s Financial Services Growth and Competitiveness Strategy published in July 2025). The FCA is seeking feedback on whether tailored market risk rules for non-bank trading firms could remove unnecessary barriers, free up capital and attract new market participants, ultimately supporting economic growth.

Engagement Paper: Market risk capital requirements for FCA investment firms

Non-financial misconduct: on 12 December 2025, the FCA published rules amending its guidance in the Code of Conduct (COCON) and Fitness and Propriety (FIT) sourcebooks of the FCA handbook. The changes amend the scope of the Conduct Rules to bring non-financial misconduct within scope in relevant circumstances as well as clarifying the FCA’s expectations for firms when assessing fitness and propriety in relation to misconduct in private life. 

FCA confirms final guidance to tackle serious non-financial misconduct in financial services | FCA
PS25/23: Tackling non-financial misconduct in financial services | FCA

Nationwide fined £44m: on 12 December 2025, the FCA fined Nationwide Building Society for inadequate anti-financial crime systems and controls between October 2016 to July 2021. 

FCA fines Nationwide £44m for failings in financial crime controls | FCA

FCA update on capital deduction for redress (CDR) for personal investment firms: on 12 December 2025, the FCA updated the webpage on its consultation paper (CP23/24) on capital deduction for redress. Due to various wider regulatory changes impacting the advice market, the FCA have decided not to implement CDR. In its updated statement, the FCA reiterated its expectation for firms to carefully consider and follow its communication.

Redress liabilities: the polluter pays | FCA. 
CP23/24: Capital deduction for redress: personal investment firms | FCA

9^th Edition of the regulatory initiatives grid: on 11 December 2025, the FCA published the latest edition of the regulatory initiatives grid. The grid sets out the FCA’s planned initiatives across multiple sectors over the next 12 months.

Regulatory Initiatives Grid - 9th Edition (December 2025) | FCA

Risk warnings: on 11 December 2025, the FCA published a new webpage on risk warnings. The webpage sets out the FCA’s expectations of firms promoting investment products as well as common misconceptions about risk warnings. 

Risk warnings for mainstream investments | FCA

Targeted Support: on 11 December 2025, the FCA published a policy statement setting out their near-final rules for a new regulatory framework for targeted support in pensions and retail investments.

Millions of people set to get extra help with investments and pensions decisions | FCA
PS25/22: Supporting consumers’ pensions and investment decisions: rules for targeted support

Liquidity risk management: on 9 December 2025, the FCA published a consultation paper on enhancing liquidity risk management. The proposals apply to AFMs of UCITS and NURS and aim to: (i) promote effective use of anti-dilution by AFMs; and (ii) ensure that AFMs have robust liquidity risk management processes.

CP25/38: Enhancing fund liquidity risk management

Handbook clarifications CP: on 9 December 2025, the FCA published a consultation paper setting out targeted clarifications to handbook materials. The proposed changes are intended to form part of the FCA’s Consumer Duty Requirements Review and to reduce administrative burdens on firms in support of the FCA’s strategy. The proposals include (amongst others) streamlining amendments to the investment powers rules in Chapter 5 of COLL in relation to investing in collective investment schemes and amendments to CASS in relation to record-keeping requirements and updating rules on the frequency of and sources used for external custody reconciliations.

CP25/37: Targeted clarifications of Handbook materials

Growth agenda: on 9 December 2025, the FCA and the PRA each sent letters to the Prime Minister with an update on their work to support the Government’s growth agenda.

Letter to Prime Minister updating on our approach to growth PRA letter to the Prime Minister

Client categorisation and conflicts rules consultation: on 8 December 2025, the FCA published a consultation on reforming the professional client categorisation rules (CP25/36). The consultation also proposed changes to rationalise existing conflicts of interest rules. Please see our article for further information.

CCI regime: on 8 December 2025, the FCA released a policy statement setting out its final rules for the new Consumer Composite Investments (CCI) regime. The CCI regime replaces the PRIIPS and UCITS disclosure regimes. 

PS25/20: Supporting informed decision making: Final rules for Consumer Composite Investments

Expanding consumer access to investments: on 8 December 2025, the FCA published a discussion paper which considers changes to the regulatory framework to encourage consumer investment by helping consumers to take informed risks and equip them with the confidence to put their money to work in search of higher long-term returns than cash savings. The discussion paper in particular focuses on reforms to:

• financial promotion and distribution rules;

• appropriateness tests;

• the Consumer Duty; and 

• the FSMA (Financial Promotions) Order 2005.

DP25/3: Expanding consumer access to investments

FCA statement on manufacturing products or services: on 8 December 2025, the FCA published a statement on its expectations for firms working together to manufacture products or services under the Consumer Duty. The statement sets out the FCA’s expectations of firms in distribution chains with regard to: decision-making; allocation of responsibility; liability; and outsourcing. The statement also clarifies the FCA’s considerations for reviewing the scope of the Consumer Duty ahead of a further consultation next year.  

Statement on firms working together to manufacture products or services

COLL 5 changes: on 5 December 2025, the FCA published a quarterly consultation which included proposals to extend the transitional period for the recent amendments to the concentration rules in COLL 5.2.29R(3) (as originally consulted on in CP24/11). The FCA now proposes to extend the transitional period from 30 January 2026 to 31 January 2027 to allow the FCA more time to amend the rules more substantially. 

CP25/35: Quarterly consultation paper No. 50

Provisional licencing regime: on 4 December 2025, the Treasury published a policy update on its proposals for a provisional licencing regime (as announced in its March action plan). The latest proposals can be found in our article.

Creating a Provisional Licences Authorisation Regime - Policy Update 2025

ESG ratings: On 1 December 2025, the FCA announced the publication of new proposed transparency, governance and conflict of interest management requirements for ESG ratings providers. The UK Government will regulate ESG ratings providers, under the supervision of the FCA. The law applies to UK ratings providers, as well as foreign providers offering ESG ratings in the UK.

CP25/34: ESG ratings: proposed approach to regulation  | FCA

ESMA revises guidelines on liquidity management tools under AIFMD and UCITS Directive: on 18 December 2025, ESMA published a report containing a revised version of its guidelines on liquidity management tools for UCITS and open-ended alternative investment funds.

ESMA Report on amended guidelines on LMTs