Investment management update - May 2026

Appointed representative liability: on 1 April 2026, the Supreme Court handed down judgment in Kession Capital Ltd (In Liquidation) v KVB Consultants Ltd. The Supreme Court held that Kession Capital Ltd. was not responsible for the acts of its appointed representative who dealt with retail clients despite being expressly prohibited from doing so under the terms of the appointed representative Agreement (“ARA”).  

Kession Capital Ltd (in Liquidation) (Appellant) v KVB Consultants Ltd and others (Respondents) - UK Supreme Court

Customer due diligence: on 8 April 2026, the FCA published a summary of its findings from its multi-firm review of Customer Due Diligence (“CDD"), Enhanced Due Diligence ("EDD") and ongoing due diligence controls. The review included asset management firms and non-bank lenders, amongst others, with the FCA highlighting that the findings apply to all firms undertaking CDD. Examples of poor practice included:

• the level and depth of reviews;
• the independence of the compliance monitoring and audit processes;
• lack of detail on how firms were checking for quality control;
• in some cases, no independent second line assurance, with the same staff responsible for both onboarding and reviewing customers, raising questions about impartiality and effectiveness of testing; and
• some firms lacked version control of their documentation, meaning they could not demonstrate an audit trail of reviews or changes made. 

Firms’ customer due diligence processes and controls: our findings | FCA

Consumer duty reports: on 16 April 2026 the FCA published a blog post by Jonathan Pearson, FCA Head of Consumer Policy, setting out the areas that firms need to focus on in their next consumer duty board reports including:

• clearly linking data to customer outcomes;
• monitoring outcomes delivered by third parties;
• evidencing meaningful board challenge; and
• deepening assessments of consumer understanding and support.

Year 2 Consumer Duty Board Reports: progress and what comes next | FCA

FCA policy statement on short selling: on 16 April 2026, the FCA published PS26/5 on changes to the UK short selling regime. The FCA is introducing a new Short Selling Rules sourcebook (SSR) to replace the EU derived UK Short Selling Regulation (236/2012). The new rules will set requirements on:

• the notification of net short positions;
• the covering of short sales of certain admitted shares;
• the reportable shares list;
• the market maker exemption and the stabilisation exemption; and
• the FCA's calculation and publication of aggregate net short positions.

PS26/5: Changes to the UK Short Selling Regime

Market sounding review: on 20 April 2026, the FCA published the findings of its analysis of market soundings on market quality in equity capital market transactions in UK listed shares. The review included findings which are relevant to buy-side firms who receive market soundings. 

Market soundings in UK equity capital markets – wholesale banks | FCA

Oversight of inactive appointed representatives (“ARs”): on 21 April 2026, the FCA published examples of good practice and areas for improvement in their review of oversight of inactive ARs. The FCA makes it clear that principal firms cannot rely on transaction oversight as a source of information. The FCA expects principal firms to: 

• actively and appropriately engage with their ARs through oversight, and use robust data quality, and governance, including additional measures when an AR is inactive;
• provide accurate and clear explanations in REP025 regulatory returns where ARs have not carried out regulated activities during the specific reporting period; and
• terminate AR relationships where they are no longer appropriate and notify the FCA accordingly. 

Managing potential risks from inactive appointed representatives | FCA

Reform of SMCR: on 22 April 2026, the FCA, PRA and HM Treasury each published further policy statements/responses on reforming the Senior Managers & Certification Regime. The reforms are being implemented in two phases, with some changes becoming effective immediately. Please see our article for further detail on implementation: Streamlining SMCR: Immediate changes and the road ahead.

Financial adviser survey: on 23 April 2026, the FCA published its findings from its Financial Adviser Survey. Key findings include:

• firms responding to the survey advise on around £1 trillion of assets for more than 4.1 million clients;
• large firms account for around 50% of assets under advice;
• adviser numbers have remained broadly steady at around 31,000 since 2023, despite a 15% fall in the number of authorised advice firms since 2021;
• women account for around 18% of financial advisers, despite being part of around 60% of advised client relationships; and
• financial advice remains concentrated among older and wealthier consumers, with regulated advice currently reaching only around 9% of UK adults.

FCA publishes findings from financial adviser market survey | FCA 

Understanding the advice market: financial advice firms survey 2025 | FCA

Market Watch 85: on 29 April 2026, the FCA published Market Watch 85 which focuses on the actions firms can take to share customer information under the Economic Crime and Corporate Transparency Act 2023 (ECCTA).  ECCTA applies to any investment firm directly sharing information about criminal market manipulation with another firm and covers the  following offences under the Financial Services Act 2012:

• section 89 (misleading statements);
• section 90 (misleading impressions); and
• section 91 (misleading statements in relation to benchmarks).

Market Watch 85 | FCA

A reform-minded regulator: on 30 April 2026, Nikhil Rathi, FCA chief executive, gave a speech at the Association of Foreign Banks luncheon. The speech focused on promoting the FCA as a reform-minded regulator which Mr Rathi described as open, responsive and willing to make changes at pace to support UK competitiveness.

A reform-minded regulator | FCA

FCA policy statement on fund tokenisation and direct to fund model: on 30 April 2026, the FCA published a policy statement on rules to support the adoption of fund tokenisation and introduce rules and guidance for an optional new Direct to Fund model. The new model will enable direct dealing in conventional and tokenised authorised funds. The new rules and guidance will enter into force with immediate effect.

PS26/7: Progressing Fund Tokenisation