July – August Regulatory Round-Up

1. HM Treasury Consultation on Revising Regulatory Deadlines

HM Treasury issued a consultation on 15 July 2025, “Regulatory Environment Pillar – Cross‑Cutting Issues,” which complements the Financial Services Growth and Competitiveness Strategy, addressing systemic improvements to the United Kingdom’s overarching regulatory framework for financial services. The proposals aim to make the regulatory framework more effective and enhance the international competitiveness of the U.K. regulatory environment for financial services.

Key proposals under the consultation include shortening the statutory processing period for certain regulatory applications. The relevant applications are as follows:

• New firm authorisations – the statutory processing period to be reduced from the current statutory processing period of six months from the receipt of a complete application to four months (and reduced from 12 months from the receipt of an incomplete application to 10 months). 
• Variations of Permission - the statutory processing period to be reduced from the current statutory processing period of six months from the receipt of a complete application to four months (and reduced from 12 months from the receipt of an incomplete application to 10 months).
• SM&CR approved persons - the statutory processing period to be reduced from the current statutory processing period of three months to two months.

In addition, the government has introduced non-statutory performance targets to accelerate the processing of these regulatory applications, aiming to exceed existing legal timeframes. From early 2026, the regulators will begin reporting on their performance against these benchmarks to increase transparency for firms. The FCA’s targets include processing Variation of Permission applications within three months (complete) or six months (incomplete); handling payment and e-money firm applications within three or 10 months; and achieving a 35-day median for SM&CR approvals.

In addition, the consultation includes legislative proposals to require the regulators to set out long-term strategies for how they will advance their objectives, including their secondary objective to facilitate growth and international competitiveness. This new statutory requirement would require the regulators to set out how they seek to advance their objectives, including through rulemaking and setting general policies and principles for how they perform their supervisory functions.  Further, the consultation proposes to enable the regulators to “have regard” to the regulatory principles and HM Treasury’s recommendations for government economic policy when producing their new long-term strategies, rather than when carrying out their functions or making day-to-day decisions.

2. Non-Financial Misconduct Rules

The Financial Conduct Authority (FCA) has now published in a policy statement its final rules on non-financial misconduct (NFM) together with a consultation on draft guidance to support firms to apply its NFM rules if needed. The policy statement extends the scope of the FCA’s NFM rules to non-bank firms. Further, the consultation proposes amended guidance in relation to NFM for the purposes of the conduct rules and fitness and propriety assessments. Please see Akin’s alert on the topic linked here. 

3. FCA Consultation on Practical Reforms to Streamline SM&CR

On 31 July 2025, the FCA published Consultation Paper CP25/21, launching Phase 1 of its long-awaited review of the Senior Managers and Certification Regime (SM&CR). The consultation paper outlines several operational changes aimed at reducing the day-to-day regulatory friction experienced by firms, without compromising the regime’s core focus on personal accountability. The FCA consultation is accompanied by a related HM Treasury consultation on SM&CR legal framework and requirements (see below).

Senior Manager Approvals – Streamlining Without Dilution

Firms continue to report concerns around delays and administrative burdens in the Senior Management Function (SMF) approval process. While the FCA processes 99% of applications within the statutory three-month period, uncertainty remains a common theme. Key proposals include the simplification of Form A, including consolidation of supporting documents, improving digital interface and validation to reduce errors and inefficiencies and enhanced guidance and transparency regarding the FCA’s assessment criteria.

Criminal Records Checks – Greater Clarity and Flexibility

The FCA proposes to address practical issues around criminal records checks (CRCs), which are currently seen as inflexible and overly burdensome in intra-group appointments. Key proposals include setting a six-month validity period for CRCs, exempting CRCs for internal moves within the same firm or group and maintaining current expectations for overseas criminal checks, despite known challenges in some jurisdictions.

12-Week Rule – More Realistic Timelines for Temporary Appointments

The current “12-week rule” allows individuals to perform SMF roles temporarily without prior FCA approval but has proven impractical when applications may take the same duration to be processed. Key proposals include allowing firms to submit applications within the 12-week window, with individuals continuing to perform the role pending a decision; confirm that such individuals remain subject to Senior Manager Conduct Rules and provide clearer guidance to avoid overuse or misuse of the provision.

Clarification on SMFs and Prescribed Responsibilities (PRs)

While the FCA is not proposing to add or remove SMF roles at this stage, it recognises a need for greater clarity and flexibility in how these roles and PRs are applied. Key proposals include guidance to reduce reliance on catch-all roles such as SMF18 and SMF7; and permission for firms to split PRs between individuals and allocate some to temporary role-holders (e.g., SMF18s), subject to conditions.

Enhanced Regime Thresholds – Inflation Adjustment and Periodic Review

The thresholds that determine whether a firm falls within the Enhanced SM&CR regime have not been reviewed since 2018 and no longer reflect economic realities. Key proposals include the following:

• Increase thresholds by ~30%:
• AUM: from £50 billion to £65 billion
• Intermediary revenue: from £35 million to £45 million
• Consumer credit lending: from £100 million to £130 million
• Introduce a five-year review cycle for future threshold assessments.
• Firms already classified as Enhanced will retain their status unless they apply to opt down.

Statements of Responsibilities (SoRs) and Management Responsibilities Maps (MRMs)

Firms report significant administrative burdens in frequently updating and resubmitting Statements of Responsibilities (SoRs) and Management Responsibilities Maps (MRMs), particularly following minor internal changes. The key proposals include a move to periodic submission of SoRs and MRMs rather than requiring re-submission upon every change, while maintaining compliance with statutory requirements.

Duty of Responsibility – No Substantive Changes

Although concerns were raised about overlaps between the Duty of Responsibility and the Conduct Rules, the FCA views the existing framework as effective and proposes no changes at this time.

Next Steps

These Phase 1 proposals reflect the FCA’s intention to adopt a more proportionate and pragmatic approach to regulatory oversight, particularly for solo-regulated firms. Feedback is due by 30 October 2025, with final rules expected in Q1 2026. Firms should consider:

• Reviewing current internal processes for SMF applications and temporary appointments
• Assessing how the proposed changes to PR allocation may impact governance structures
• Preparing for threshold changes and the potential to opt down from the Enhanced regime.

4. HM Treasury Consultation

HM Treasury launched a consultation in July 2025 to reform the SM&CR, aiming to reduce regulatory burdens while maintaining high standards in financial services. Key proposals include:

• Senior Manager Approvals: Reducing the regulatory review period for senior manager appointments from three to two months and allowing firms more time and flexibility to submit applications for unexpected or temporary changes.
• Fitness and Propriety Assessments: Streamlining the annual checks firms need to undertake to certify individuals as 'fit and proper' for their roles and increasing the validity period of criminal record checks from three to six months prior to application submission.
• Updates to the FCA Directory: The proposals extend the notification period for updates to the Directory from seven to 20 business days, other than notifications of departures, which will continue to be notifiable within seven working days.

These reforms are part of the government's broader strategy to enhance the competitiveness and efficiency of the U.K.'s financial sector. The consultation is open until 7 October 2025.

5. Amendments to FCA Primary Markets Technical Notes on Disclosure and Inside Information

The FCA’s Primary Market Bulletin 57 was published on 25 July 2025 and announces key updates for listed companies and sponsors. It finalises amendments to five existing Technical Notes:

• TN/506.3 – Periodic financial information and inside information
• TN/507.2 – Structured digital reporting for IFRS annual statements
• TN/520.3 – Delaying disclosure and handling leaks/rumours
• TN/521.4 – Assessing and handling inside information
• TN/542.3 – Issuer obligations under the Listing Rules.

6. Failure to prevent fraud offence takes effect

The new corporate “failure to prevent fraud” offence introduced under the Economic Crime and Corporate Transparency Act 2023 (Act) came into force in September 2025. Similarly to the existing corporate criminal offence of “failure to tax evasion” the new offence requires corporations to take active steps to take proactive measures to prevent fraud.

Large organisations (as defined) may be liable for the corporate criminal offence if they “fail to prevent” specific fraud offences by their employees and certain other associated persons, including subsidiaries. The offence applies to fraud offences of fraud, uttering and embezzlement and aiding, abetting, counselling or procuring the commission of such an offence that may be prosecuted in the U.K. It includes U.K. organisations as well as certain non-UK organisations based where the fraud has a relevant link to the U.K. Penalties for the offence include unlimited fines. It is a defence if an organisation had in place “reasonable fraud prevention procedures.” Please see the Akin client alert on the topic. 

7. FCA Final Notice re Jes Staley

In July 2025, the FCA issued a Final Notice imposing a £1.107 million fine on James Edward Staley (former Chief Executive Officer (CEO) of Barclays), alongside a prohibition preventing him from holding any senior management or significant influence roles within the U.K. financial services sector. This follows the Upper Tribunal’s decision in June 2025, which upheld the FCA’s findings that Staley breached fundamental conduct standards by recklessly approving a misleading letter submitted to the FCA. The letter falsely claimed that Staley did not maintain a close relationship with Jeffrey Epstein and that their last contact occurred long before Staley joined Barclays. These statements were contradicted by extensive email evidence. The Upper Tribunal confirmed breaches of the FCA’s Conduct Rules on integrity and cooperation, as well as the SM&CR requirement for transparency and accurate disclosure. This case underscores the FCA’s strong stance on honesty and transparency from senior figures in the financial industry.

8. FCA Enforcement for Breaches of Principles

The FCA has concluded its investigations into asset manager H2O AM LLP (H2O) and the compliance officer and published the last final notice in August 2025. By way of a reminder, the FCA issued a public censure against H2O for serious regulatory failings in August 2024. Instead of imposing a financial penalty, the FCA accepted a settlement aimed at directing funds toward compensating investors who suffered losses.

Under the agreement, H2O committed to securing €250 million for investors affected by “side-pocketed” funds; waiving around €320 million in fees and certain investments and exiting the U.K. regulated market by surrendering its permissions by the end of 2024. The FCA considered this approach prioritised investor redress while still holding the firm accountable for misconduct.

9. FCA Publishes Multi-Firm Review on Off-Channel Communications

On 27 August 2025, the Financial Conduct Authority (FCA) published the findings of its Multi-Firm Review into Off-Channel Communications. The review examined how 11 wholesale banks are managing the risks associated with business-related communications conducted outside authorised, recorded channels (so-called “off-channel” communications).

While all firms had taken steps to enhance governance, monitoring, and employee training, the FCA found that most continued to identify internal policy breaches, including by senior staff (41% of breaches involved individuals at director level or above). The FCA noted that such breaches, even if not violations of SYSC 10A, may trigger supervisory concerns—particularly where trends or seniority are involved.

Key areas of focus included:

• Updates to internal policies and surveillance lexicons (e.g. inclusion of emojis and video messages);
• Increased deployment of AI-driven monitoring tools;
• Broader use of corporate devices to separate personal and business communications;
• Variable quality of Management Information (MI), particularly between larger and smaller firms;
• Ongoing challenges with third-party surveillance vendors.

The FCA reiterated that firms remain responsible for ensuring communications related to regulated activities are recorded and auditable, regardless of technology used. No new rules are planned; firms are expected to deliver outcomes consistent with existing SYSC 10A obligations.

Firms should review internal policies, training, and oversight frameworks in light of these findings.

Key Issues

The FCA’s investigation found that between 2015-2019 H2O had breached three core Principles for Businesses: Principle 2 – Requirement that a firm conduct its business with due skill, care and diligence; Principle 3 – Requirement that the firm have adequate risk management systems; and Principle 11 – Requirement that the firm deal with its regulators in an open and cooperative way.

H2O was considered to have weak governance and controls, resulting in ineffective controls of conflicts of interest.  According to the FCA, H2O invested in illiquid and high-risk assets without sufficient analysis or proper documentation. Ongoing monitoring of these complex holdings was also inadequate, exposing investors to heightened risks. Although the firm had compliance and risk policies, the FCA found that they were poorly implemented. Oversight structures were ineffective, conflicts of interest were not adequately recorded and compliance teams failed to challenge investment decisions. Further, when the FCA began its inquiries, H2O submitted misleading and fabricated documents, including backdated due diligence records and false meeting minutes. These actions represented a serious breakdown in transparency and cooperation. The FCA has prohibited and fined the individual who was found to be responsible for these breaches.

While the breaches were significant, the FCA concluded that imposing a heavy fine would reduce funds available to compensate investors. By accepting the firm’s voluntary contributions and agreement to withdraw from regulated activities, the FCA ensured more money flowed back to those harmed.

Key Takeaways

The case highlights several important lessons for the asset management industry:

• Firms must perform thorough due diligence and maintain rigorous oversight over complex or illiquid assets.
• Strong governance frameworks and active compliance functions are critical to investor protection.
• Full transparency and cooperation with regulators are non-negotiable and attempts to mislead authorities will attract severe consequences.

By prioritising investor compensation over punitive fines, the FCA demonstrated a consumer-first approach, while still reinforcing accountability through both corporate censure and individual sanctions.