• On 28 February 2025, the FCA has issued a handbook notice, which includes amendments to the ESG Sourcebook. These are mostly corrections and clarificatory amendments but do include some more substantive changes, such as allowing 16 months to prepare a product level sustainability report from the first use of a label under Sustainability Disclosure Requirements (rather than 12 months, as was originally the case). 

Handbook Notice No 127 | FCA

• On 27 February 2025, the FCA released its latest Regulation Round-up, which publicised regulatory updates including the launch of a new companion tool to the Financial Services Register changes to the Consumer Duty Board Champion requirements. The new companion tool is designed for consumers searching the Financial Services Register and is intended to make the process of checking if firms are authorised with the correct permissions, more accessible to consumers. The tool is currently only accessible to a small number of users but will be promoted more widely later this year. The round-up also clarified that the FCA plans to update their final non-handbook guidance for firms on the Consumer Duty (FG 22/5). This is to confirm that the expectation for firms to have a Consumer Duty Board Champion no longer applies, as discussed in Nikhil Rathi’s speech, below. 

Regulation round-up - February 2025

• On 27 February 2025, the FCA chief executive, Nikhil Rathi, gave a speech at the Association of British Insurers roundtable, which set out how the FCA is supporting the government’s growth strategy. Mr Rathi highlighted the pace at which the FCA is moving and that the FCA plans to implement around 50 growth proposals recently presented to the Prime Minister in the coming weeks. These proposals cover areas such as promoting UK financial services internationally, welcoming more innovative firm, and reducing regulatory barriers. Mr Rathi reiterated the FCA’s commitment to reduce regulatory burdens where possible, highlighting the removal of the requirement for a Consumer Duty Board Champion as well as the FCA's Consumer Duty call for input (CFI) on its review of retail conduct requirements, published in July 2024. The FCA is currently reviewing the feedback. He also acknowledged industry concerns about the speed of regulatory change and confirmed that the FCA aims for fewer large-scale changes in its next five-year strategy.

The Gordian knot of growth | FCA

• On 26 February 2025, the FCA issued a portfolio letter outlining its supervision priorities for asset management and alternatives portfolios. We have written about the portfolio letter here: 

FCA's latest “Dear CEO” letter on asset management priorities - Macfarlanes

Portfolio letter: Asset Management & Alternatives - Supervisory Strategy

• On 25 February 2025, the FCA executive director of consumers, competition and international, Sarah Pritchard, gave a speech at the Investment Association Roundtable on the FCA's approach to non-bank financial intermediation (NBFI) leverage. This speech highlighted the importance of improving public and private disclosure to mitigate systemic risk from NBFI leverage. The speech outlined the importance of the three lines of defence against the build-up of systemic risk related to leverage use. The first line of defence is that NBFIs manage their own investment risk with adequate market data. The second line of defence is counterparty credit risk management which will require enhanced private disclosure between counterparties. The third line of defence is ensuring the regulator has sufficient data and tools to identify financial stability risks that market participants miss. 

Helping markets thrive and managing systemic risk: the FCA’s approach to non-bank leverage | FCA

• On 24 February 2025, the FCA published the findings of its review on the suitability of financial advisers' ongoing services. The review revealed that 83% of cases involved suitability reviews. However, the FCA was concerned about the fewer than 2% of firms, which reported they had failed to make any effort to deliver client suitability reviews. The FCA identified several areas of poor practice, including unclear client contracts, ineffective processes and controls, insufficient management oversight, and inadequate record-keeping. Firms are expected to review the FCA’s findings and assess if they need to take remedial actions.

FCA finds vast majority of ongoing suitability reviews delivered | FCA

Ongoing financial advice services | FCA

• On 14 February 2025, the FCA published its expectations for authorised fund applications. The document addresses specific questions from the fund authorisation application forms and highlights areas where applicants often fall short.

Authorised fund applications – our expectations

• On 14 February 2025, the FCA updated its web page with information relating to its consultation paper (CP24/8) on extending the Sustainability Disclosure Requirements and investment labelling regime to portfolio managers. The FCA no longer intends to publish a policy statement to CP24/8 in Q2 2025 and has said that it will continue to reflect on the feedback received and provide further information in due course.

CP24/8: Extending the SDR regime to Portfolio Management | FCA

• On 6 February 2025, the House of Lords Financial Services Regulation Committee (the Committee) published a report, “Naming and shaming: how not to regulate”. The report highlights that serious questions remain over the FCA’s consultation paper CP24/2 (Part 2) on publicising enforcement investigations. The Committee found that the FCA had not made a convincing case for the proposed shift to make public announcements of enforcement investigations into firms more frequently. It was noted that the proposals afford the FCA considerable discretion, which could pose a reputational risk for firms. The Committee also considered that the proposals risked positioning the UK as an international outlier in a manner misaligned with the FCA’s growth objective. 

The FCA has subsequently confirmed that it has shelved its proposals to publicise live enforcement investigations. Read our Naming and shaming: FCA backtracking and residual uncertainty - Macfarlanes article for more information.

Failings in FCA proposals to publish enforcement investigations highlighted by Committee report - Committees - UK Parliament 

• On 4 February 2025, the FCA released a speech by Emily Shepperd, its Chief Operating Officer, at the 10th Annual Culture and Conduct in Financial Services Summit, focusing on the importance of culture within firms. The speech emphasised that healthy firm cultures are essential for economic growth, which involves taking on greater risks. Ms Shepperd confirmed in the speech that along with the PRA and HM Treasury, the FCA is reviewing the Senior Managers and Certification Regime to enhance its efficiency and effectiveness, with a consultation paper to be published in due course.

Culture is contagious | FCA

• The European Commission has adopted a new package of proposals, termed the “EU ESG omnibus”. The proposals aim to simplify EU rules, boost competitiveness, and unlock additional investment capacity. We have written about the proposals here: 

The EU ESG omnibus proposals - Macfarlanes

Q&A on simplification omnibus I and II - European Commission