1. Financial Services and Markets Bill: Provisions Relevant to Investment Managers

Executive Summary: This summary focuses on provisions of the Bill most relevant to investment managers, fund managers and investment advisers.

The Financial Services and Markets Bill (the Bill) was introduced in the House of Lords on 19 May 2026, with its second reading taking place on 8 June 2026.¹ If enacted later this year, it will represent a significant overhaul of UK financial services regulation. While much of the Bill addresses retail banking and consumer credit matters, several provisions are relevant to investment managers.

For investment managers, the key areas of reform include (i) reform of the Senior Managers and Certification Regime (SM&CR); (ii) reforms to the appointed representative (AR) regime; (iii) consolidation of anti-money laundering (AML)/counter-terrorist financing (CTF) supervision under the Financial Conduct Authority (the FCA); (iv) a new provisional licences authorisation regime; and (v) new overseas recognition regimes. These changes reflect the government’s Financial Services Growth and Competitiveness Strategy, as published in July 2025,² and its Regulation Action Plan.³

For investment managers, the Bill’s most significant impact will be the streamlining of the SM&CR requirements and the strengthening of the appointed representative regime, including bringing ARs within the scope of the SM&CR.

Key Provisions:

1. Senior Managers and Certification Regime Reform:

• Current Position: The SM&CR—as contained within Part 5 of Financial Services and Markets Act 2000 (FSMA)—is a tripartite regime requiring (i) regulatory pre-approval for senior management functions (the Senior Managers Regime), (ii) annual certification of certain employees (the Certification Regime), and (iii) compliance with conduct rules. While intended to enhance individual accountability, firms have raised concerns about the compliance burden it imposes, particularly when appointing new executives.
• New Position: The Bill, building on the Phase 1 administrative reforms already made by the FCA⁴ and Prudential Regulation Authority (PRA)⁵ in April-July 2026, introduces significant streamlining measures intended to reduce the legislative footprint of the regime and shift detail into FCA/PRA rulebooks:
• Removing the requirement for regulatory pre-approval for certain senior management functions: The FCA and the PRA will be empowered to specify in their rules that for certain senior management functions a firm can notify the regulators of the appointment instead of seeking pre-approval. Nonetheless, firms will remain responsible for ensuring that those individuals they appoint are fit and proper.
• Repeal of the certification regime: The certification regime will be repealed, ending the statutory requirement to issue annual certificates. Regulators will instead be able to set requirements through their existing rules, retaining the substance of the regime in a more proportionate form.
• Statements of responsibilities: Statutory requirements relating to statements of responsibilities will be removed. The FCA and PRA will have the discretion to make rules determining when statements are required and what form they should take.
• Regulatory pre-approval of senior manager applications subject to conditions or for limited periods: The FCA and PRA will be able to set out in their rules and guidance the circumstances in which applications subject to a condition or for a limited period can be requested directly by firms.
• Conduct Rules: Several firm‑facing statutory obligations (for example informing individuals that the rules apply, providing training, and notifying regulators of breaches of conduct rules when disciplinary action has been taken) are removed. Moreover, the PRA and FCA will have the ability to make conduct rules with respect to sole traders, closing a long‑standing perimeter gap whereby sole‑trader principals were outside the scope of the Conduct Rules.

2. Provisional Licences Authorisation Regime:

• Current Position: Firms seeking FCA authorisation must demonstrate they meet all the Threshold Conditions⁶ (e.g., appropriate financial and non-financial resources) on an indefinite ongoing basis before being granted Part 4A permission (to carry on regulated financial services activities) under FSMA. This can create barriers for innovative start-ups and early-stage financial services firms.
• New Position: The Bill creates a new “provisional licences” regime, allowing eligible firms to conduct limited regulated activities under FCA supervision for a time-limited period (not exceeding two years). Key features include:
• Firms must demonstrate they will meet Threshold Conditions for the provisional licence period, rather than on an indefinite basis.
• The FCA can impose limitations, restrictions, variations and requirements on firms holding temporary permissions.
• Firms can progress towards full authorisation by showing that they can satisfy the Threshold Conditions beyond the duration of the provisional licence. If firms do not achieve full authorisation by the end of the provisional period, the permission will expire and provision will be made for safe wind-down.
• Not every kind of firm or regulated activity will be suitable for the regime. Consequently, the FCA will have powers to specify which activities are within scope.
• Notably, firms holding temporary permissions will be treated as authorised persons but the Bill expressly disqualifies such firms from acting as principals for appointed representatives.

Other Changes Relevant to Investment Managers:

• AML/CTF Supervision Consolidation: The UK’s AML/CTF supervisory regime is currently fragmented between 25 separate bodies, including the FCA, HMRC, the Gambling Commission and a host of professional body supervisors. Understandably, this has led to inconsistencies in approach. Accordingly, the Bill provides for the FCA to take on AML/CTF supervisory responsibilities of these bodies. This consolidation is intended to strengthen the UK’s defences against illicit finance while simplifying the regulatory system.
• Overseas recognition regimes: New powers will enable the Treasury to unilaterally create overseas recognition regimes in areas not covered by existing assimilated European Union (EU) law, where there is a potentially comparable regime in an overseas jurisdiction. The intent is to support cross-border market access through an outcomes-based approach rather than line-by-line equivalence assessments.
• Appointed representatives: The Bill reforms the AR regime, by requiring FCA permission to act as principal and extending Financial Ombudsman Service (FOS) jurisdiction to ARs, bringing ARs within the scope of the SM&CR (including, where the FCA so specifies, a dedicated AR Senior Management Function in principal firms), to address concerns about oversight of the AR model.
• Cryptoassets: The Bill introduces delegated powers allowing the Treasury or Secretary of State to amend provisions in the Proceeds of Crime Act 2002, Terrorism Act 2000 and Anti-terrorism, Crime and Security Act 2001 relating to cryptoasset seizure and forfeiture. This addresses limitations in current powers that have prevented effective recovery of criminal cryptoassets.
• Improving the operational effectiveness of the FCA and PRA: This has several different threads, including (i) reducing the statutory deadlines for determining key regulatory applications (e.g., complete new firm applications and variation of permission applications shortened from six months to four months); (ii) requiring the FCA and the PRA to produce long-term strategies at least once every five years; and (iii) reducing the administrative requirements on the FCA, PRA and Bank of England (e.g., removing the need for the regulators to give guidance on advancing their objectives). Perhaps most significantly, neither the FCA nor the PRA must have regard to the regulatory principles of FSMA (e.g., proportionality) under the Bill in carrying out their duties (instead, only in the aforementioned long-term strategy), and the Bill also obviates the requirement that either regulator explain to parliamentary committees how the regulatory principles apply to their draft regulations.

Practical Implications:

The Bill’s reforms will have the following implications for investment managers:

• SM&CR simplification: While the reduction in prescriptive requirements is welcome and should reduce compliance costs for investment managers, firms should await FCA and PRA rule changes to understand the new requirements. The shift from statutory certification to regulator rules may require updates to internal policies. Investment managers should monitor FCA consultations on the detailed implementation of these changes.
• Appointed representatives: Investment managers acting as principals for appointed representatives will need to prepare for the new requirement to obtain FCA permission to act as principal, and the extension of SM&CR to ARs.
• AML/CTF supervision: Investment managers should anticipate transitioning their AML/CTF supervisory relationship to a consolidated FCA-led regime. This may require engagement with revised FCA guidance and supervisory expectations.
• New authorisations: Investment management start-ups and newly authorised firms should consider whether the provisional licences regime could facilitate their entry to market, bearing in mind that it only covers activities already within scope of the FCA’s regulatory perimeter.

Next steps:

If enacted, most of the Bill’s substantive provisions will take effect from dates to be specified by HM Treasury via commencement regulations, with implementation linked to the FCA and PRA’s parallel rule‑making processes. Only a narrow set of provisions take effect on Royal Assent.

2. New MAR Disclosure Regime now in Force

• As of 5 June 2026, significant changes to Regulation (EU) No 596/2014 (MAR) disclosure regime are now in effect. These changes, introduced by Regulation (EU) 2024/2809 (the Listing Act), alter how issuers must handle inside information, particularly in protracted processes such as M&A transactions, fundraisings and major corporate decisions.
• The key changes are the following:

1. Intermediate steps in protracted processes are excluded from an issuer’s disclosure obligations, such that only the final event or final circumstances of the process trigger disclosure.
2. The “not likely to mislead the public” condition for delayed disclosure has been reformulated with a new, more objective “not in contrast” test.

Background:

• The MAR aims to ensure market integrity and protect investors by prohibiting insider trading, the unlawful disclosure of inside information and market manipulation across European financial markets.
• Article 17(1) MAR requires an issuer to disclose, as soon as possible, inside information that directly concerns it.
• Article 17(4) permits an issuer, on its own responsibility, to delay disclosure where, cumulatively: (i) immediate disclosure would be likely to prejudice the issuer’s legitimate interests; (ii) delay is not likely to mislead the public; and (iii) the issuer can ensure the confidentiality of the information.

What has changed?

• The Listing Act amends Article 17 MAR in two principal respects: (i) it excludes intermediate steps in protracted processes from the scope of the Article 17(1) disclosure obligation; and (ii) it reformulates the second condition (above) for delayed disclosure under Article 17(4).
• Amended Article 17(1) provides that the disclosure obligation shall not apply to “…intermediate steps in a protracted process… where those steps are connected with bringing about or resulting in particular circumstances or a particular event”. In a protracted process, “…only the final circumstances or final event shall be required to be disclosed, as soon as possible after they have occurred”.
• Accordingly, from 5 June 2026, intermediate-step information in a protracted process falls outside of the disclosure obligation under Article 17(1), provided confidentiality is maintained. Disclosure is required only on the occurrence of the final event or final circumstances.
• Amended Article 17(4) further qualifies the issuer’s disclosure obligations under Article 17(1) by allowing delayed disclosure provided that the inside information that the issuer intends to delay is not “in contrast” with the latest public announcement or other communication by the issuer on the same matter to which the inside information refers. The first and third conditions (legitimate interests and confidentiality) are unchanged.
• In practice, issuers must monitor and control their public communications to maintain consistency with any information they may wish to delay. Any material inconsistency between the inside information and such prior communications will trigger the “in contrast” test and preclude reliance on the Article 17(4) delay.
• Where an issuer has delayed the disclosure of inside information having satisfied all of the above conditions, it must inform the relevant competent authority that disclosure of the information was delayed as well as provide a written explanation of how the foregoing conditions were satisfied, immediately after the information is disclosed to the public.

The Delegated Regulation: Guidance on Final Events and Contrast Situations

• On 8 April 2026, the European Commission adopted Delegated Regulation supplementing Regulation (EU) No 596/2014 of the European Parliament and of the Council as regards disclosure of inside information in protracted processes and delay of disclosure.⁷ It was adopted under the empowerment in new Article 17(12) MAR and followed extensive consultation by the European Securities and Markets Authority.
• The Delegated Regulation sets out three non-exhaustive lists: (i) final events or final circumstances in protracted processes and the relevant moment of disclosure (Annex I); (ii) situations in which inside information intended to be delayed is “in contrast” with the issuer’s latest public announcement or other communication on the same matter (Annex II); and (iii) the categories of communications relevant to that “in contrast” assessment (Annex III). The Delegated Regulation also confirms that, upon request, issuers must be able to substantiate to the competent authority their identification of the final event or final circumstances and the relevant moment of disclosure.
• Annex I covers protracted processes across seven categories, each paired with a “final event or final circumstances” and the relevant moment of disclosure: (A) business strategy (mergers, acquisitions, agreements, major corporate reorganisations); (B) capital structure, dividends, and interest payments; (C) financial information; (D) corporate governance; (E) interventions by public authorities; (F) credit institutions and insurance undertakings; and (G) legal proceedings, sanctions, and delisting.
• For example, in the context of a major corporate reorganisation, disclosure is required as soon as possible after the issuer’s governing body has taken the final decision to proceed. Similarly, for a share buyback, disclosure is required as soon as possible after the issuer’s governing body has taken the final decision to carry it out.
• Annex II contains a non-exhaustive list of situations where inside information intended to be delayed is deemed “in contrast” with the issuer’s latest public communication. Examples include material changes to previously announced forecasts, financial results, or business objectives (e.g., profit warnings or earnings surprises), and material changes to the capital structure as previously announced (e.g., a significant modification in the issuance of financial instruments).
• Annex III specifies the types of communication relevant to that assessment, including: (A) press releases and publications by the issuer (including via social media and its website); (B) public interviews by persons formally representing the issuer; and (C) publicly accessible pre-close calls, roadshows, webinars and podcasts.
• The Delegated Regulation will enter into force on the third day following its publication in the Official Journal of the European Union.

Relevance to Investment Managers:

• While the MAR disclosure changes primarily concern issuers, investment managers should be aware of these developments for the following reasons:
• Portfolio company investments: Investment managers with investments in listed companies (whether through public equity strategies, private equity exits, or co-investment structures) should understand how the revised disclosure regime affects timing of corporate announcements by portfolio companies.
• Inside information policies: Investment managers should review their internal policies and procedures for handling inside information received in connection with their investments, ensuring alignment with the revised disclosure framework.

3. FCA Review of Financial Promotion Approvers: Key Findings and Compliance Implications

• On 27 May 2026, the FCA published its review of firms that approve financial promotions for unauthorised businesses. The review scrutinised 10 authorised firms across Buy Now Pay Later, crowdfunding and corporate finance sectors. Investment managers who act as s21 approvers (as defined below), or who use approved financial promotions in their marketing activities, should take note of the FCA’s findings.⁸

The Section 21 Framework

• Under s.21 of the FSMA, a person may not, in the course of business, communicate an invitation or inducement to engage in investment activity, unless (i) they are an authorised person under Part 4A of FSMA; (ii) the promotion has been approved by an authorised person (a s21 approver); or (iii) an exemption in the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 applies. The focus of the FCA’s review was on s21 approvers.

The FCA’s Expectations for Section 21 Approvers

• The FCA has previously published extensive guidance on a s21 approver’s obligations and responsibilities, including in its Policy Statement PS23/13 “Introducing a gateway for firms who approve financial promotions”.⁹
• Authorised firms must fully account for their responsibilities under the Consumer Duty when approving promotions for unauthorised persons. Promotions should support retail customers’ understanding by being tailored to the customer profile-considering product complexity, communication medium and any customer vulnerability.
• S21 approvers must also ensure promotions are clear, fair, and not misleading before approval, and must confirm that promotions comply with FCA rules more generally so that they can be lawfully marketed to consumers.

Key Findings from the Review

• The FCA found that firms with the most rigorous approval processes had embedded consideration of the Consumer Duty from the outset.
• Conversely, the review identified several areas of concern. Some of the firms reviewed had approved adverts containing unsubstantiated claims; in other cases, retail investors were able to view promotions intended for professional clients only. Additionally, certain firms failed to conduct their own substantive reviews and instead relied on third-party templates without adequate scrutiny.

Regulatory Consequences

• The FCA has indicated that it will take action where s21 approvers fall short of their obligations. As a direct result of the review, one firm was required to undertake a remediation exercise, and certain websites (i.e., financial promotions) were blocked from retail customer access.
• Investment managers acting as s21 approvers (or those relying on such approvals for their marketing materials) should consider the following steps:
• Review and update internal approval procedures to ensure Consumer Duty considerations are embedded at every stage of the promotion sign-off process.
• Conduct a gap analysis of current financial promotions against the FCA’s expectations, focusing on substantiation of claims, audience targeting and clarity for retail customers.
• Avoid over-reliance on third-party templates and instead ensure that each promotion receives a bespoke, documented review.

4. FCA has increased commodity derivatives threshold under UK EMIR: Implications for Investment Managers

On 29 May 2026, the FCA issued its “Handbook Notice No. 141” in which it doubled the clearing threshold for commodity derivatives under UK European Market Infrastructure Regulation (EMIR)¹⁰ from €3 billion to €6 billion (with the thresholds for other asset classes remaining unchanged).¹¹ This change, which took effect on 29 May 2026, is particularly relevant to investment managers with significant commodity derivatives exposure.

Under UK EMIR, non-financial counterparties that exceed certain clearing thresholds are subject to mandatory clearing obligations for in-scope over-the-counter derivatives and bilateral margin requirements for uncleared contracts.¹² The clearing threshold for commodity derivatives had remained at €3 billion since it was originally set in 2016.

However, significant increases in commodity prices in the intervening period (with Brent crude oil increasing 150% since 2016, for instance) have effectively lowered the threshold in real terms for market participants. Firms raised concerns that they were being pushed closer to the threshold despite not increasing their trading volumes, potentially triggering disproportionate compliance costs. Moreover, in pressing firms to manage their trading to remain under the threshold and avoid triggering these resultant obligations, the FCA noted that this practice had “…the potential to constrain economically beneficial activity”. Additional headroom was therefore deemed to be required.

The FCA had originally suggested increasing the clearing threshold for commodity derivatives to €5 billion in its “Quarterly Consultation CP26/8 No. 51”.¹³ However, following industry feedback, increasing the threshold to €6 billion was deemed to be more appropriate in a market experiencing (potentially prolonged) higher commodity prices.

Moreover, the FCA expressly acknowledged that maintaining an inappropriately low threshold could put UK firms at a competitive disadvantage relative to their counterparts in other jurisdictions (noting that the threshold under EMIR is €4 billion). The increased threshold helps address this concern.

Last, the FCA emphasised that such a measure is purely transitional, as it continues to progress more widescale changes to the clearing regime. This could involve another revised clearing threshold for commodity derivatives. In the meantime, however, the FCA is of the view that the €6 billion threshold appropriately caters for the higher commodity prices that the market is experiencing.

Implications for Investment Managers: Investment managers trading commodity derivatives should reassess their clearing threshold calculations in light of the increased €6 billion threshold. Firms that were approaching the previous €3 billion threshold may now have additional headroom before triggering mandatory clearing and bilateral margin requirements under UK EMIR. However, managers should note that this change is transitional, and further revisions to the clearing regime are anticipated.

5. FCA Consults on New Delegation Rules for Authorised Fund Depositaries: Key Implications for Investment Managers

• On 21 May 2026, the FCA published CP26/16: Registration of Authorised Fund Assets (CP26/16), proposing targeted changes to how depositaries of UK authorised alternative investment funds (AIFs) safekeep and register certain private market assets.¹⁴
• Under current rules, depositaries of authorised AIFs managed by Authorised Fund Managers (AFMs) that are “full-scope” AIF managers (AIFMs) must hold legal title to certain private market assets (such as UK real estate and partnership interests) in their own name or that of a controlled nominee.¹⁵
• This exposes depositaries to risks (including potential criminal liability under the Building Safety Act 2022 and the not-yet-in-force Terrorism (Protection of Premises) Act 2025), even though they have no control over how these assets are managed.
• The FCA’s proposed solution has two core elements, with different approaches depending on the category of asset:
• For assets that are neither safe custody investments nor AIF custodial assets (e.g., a partnership that is not a collective investment scheme (CIS), or real estate), depositaries would be permitted (but not obliged) to delegate their registration function (under the Collective Investment Schemes Sourcebook (COLL)) to affiliates of the AFM only, subject to new investor protections (e.g., the affiliate holds the asset on trust for the depositary, transfer of legal title or control of the affiliate requires depositary consent, no sub-delegation, and a requirement for external legal advice before delegation).
• For assets that are safe custody investments but not AIF custodial assets (e.g., certain partnerships that are CISs but whose units cannot be held in a financial instruments account), depositaries could delegate custody under Chapter 6 of the Client Assets Sourcebook (CASS) to a regulated third-party custodian. The depositary itself would no longer need to have these assets registered in its (or its controlled nominee’s) name.
• If adopted, these changes would allow authorised AIFs to continue investing in private markets, particularly UK commercial real estate and infrastructure, without depositaries bearing ancillary risks unrelated to their core regulatory functions. The FCA has stated that absent intervention, depositaries may stop offering services to funds invested in these assets, limiting investor choice and potentially reducing investment in UK long-term assets critical for economic growth.
• Investment managers operating authorised AIFs invested in real estate and partnership vehicles should review CP26/16 carefully. The proposed changes would directly affect the depositary arrangements for these funds and may provide greater flexibility for fund structures investing in UK commercial real estate and infrastructure.
• The consultation closed on 9 July 2026.

6. ESMA Report: Good and Poor Practices of the Compliance and Audit Functions of Fund Managers - Key Takeaways for Investment Managers

Executive Summary

This article highlights the findings from European Securities and Markets Authority’s (ESMA) 2025 Common Supervisory Action on compliance and internal audit functions, which are directly relevant to Undertakings for Collective Investment in Transferable Securities (UCITS) managers and AIFMs operating in the EU/European Economic Area (EEA).

• On 11 May 2026, the ESMA published the results of its 2025 Common Supervisory Action (CSA)¹⁶ on the compliance and internal audit functions of fund managers. This review was conducted in cooperation with EU and EEA national competent authorities (NCAs).¹⁷
• The CSA forms part of ESMA’s ongoing supervisory work across the EU/EEA, with the objective of identifying good and poor practices in compliance and internal audit functions across the fund management industry.
• Investment managers should engage with their local NCAs where shortcomings have been identified and implement remedial actions. ESMA has indicated it will continue dialogue with NCAs on this topic, with further reporting and guidance expected.

Key Findings

• Overall, ESMA observed positive outcomes, noting good practices across compliance and audit functions.
• However, NCAs identified several areas of poor practice across fund managers, summarised below.
• Action Items for Investment Managers: AIFMs and UCITS managers should review the poor practices identified in this report against their own compliance and internal audit arrangements. In particular, managers should assess whether their group-level policies are adequately tailored to the specific regulatory requirements and business activities of each entity, and whether there is sufficient coordination between compliance and internal audit functions.

7. ESMA Final Report: Integrated Collection of Funds’ Data - Key Implications for Investment Managers

• On 4 May 2026, ESMA published its final report (Fund Data Report)¹⁹ for a proposed integrated reporting system for the collection of funds’ data. This report follows from the 2025 Discussion Paper (DP)²⁰ which invited fund manager comments on three proposed reporting frameworks.
• These frameworks were:

1. IR1: Retention of multiple reporting obligations across the EU.
2. IR2: Fully integrated and harmonised reporting obligation across the EU.
3. IR3: An integrated framework which allows for national divergence and requirements.

Scope and Fund Types Covered

• The integrated framework would apply to all EU-authorised fund managers and the funds they manage, including those caught by the current UCITS²¹, Alternative Investment Fund Managers Directive (AIFMD)²² and Money Market Funds Regulation.²³

ESMA’s Preferred Approach: IR2 - Fully Integrated, Harmonised Framework

• Following the responses from the DP, the Fund Data Report has proposed IR2 as the preferred approach to be introduced by ESMA. The features of IR2 include:

1. Single EU-wide Reporting Structure: All existing EU and national-level reporting obligations under the AIFMD and UCITS Directives, and statistical frameworks will be replaced by one. There will be a single-entry point for fund managers to submit regulatory data reports.
2. Modular Approach²⁴: The framework will include core modules for all UCITS and AIFs to complete. There will then be additional, specific modules dependent on (i) fund type, (ii) investment strategy, (iii) risk profile, and (iv) supervisory ESMA concerns such as during periods of specific market stress.²⁵
3. Common Data Dictionary: This will establish common definitions for key terms with the priority definitions to be harmonised, including assets under management (AuM), notional calculations, foreign exchange (FX) hedge treatment.

Centralised EU Data Hub: Funds will only be required to submit a single report to one designated NCA, the NCA would submit the report to a new EU-wide central data system, maintained by ESMA. This system would enable data sharing between NCAs, the European Central Bank, the European Systemic Risk Board and other relevant authorities.

Implementation Timeline

• ESMA proposes a phased implementation approach:

1. Phase 1 (estimated by 2029): ESMA to deliver draft regulatory technical standards (RTS) and implementing technical standards (ITS) to the European Commission (EC), specifying the detailed reporting framework, proposed definitions and modules by April 2027. ESMA suggests, given the complexity of the proposals, that it may take up to 2029 for the RTS, ITS and infrastructure to be finalised.
2. Phase 2 (estimated 2031): Full implementation of the integrated reporting framework, with fund managers required to submit reports through the new framework going forward.

• Transitional arrangements will be provided to allow fund managers sufficient time to update systems and processes, with parallel reporting permitted during an initial transition period.
• Action Items for Investment Managers: UCITS managers and AIFMs should monitor the development of this integrated reporting framework and engage with ESMA consultations on the detailed RTS and ITS. Firms should begin planning for potential systems and process updates required to meet the new reporting requirements, though the estimated implementation date of 2031 provides substantial lead time for preparation.

8. ESMA Interim Report: Simplification of Financial Transaction Reporting - Implications for Investment Managers

• On 4 May 2026, ESMA published its Interim Report on a Comprehensive Approach for the Simplification of Financial Transaction Reporting (Reporting IR).²⁶ This follows and summarises the findings from ESMA’s Call for Evidence launched in June 2025 (CfE).²⁷The Reporting IR is an intermediate step before ESMA’s Final Report on its findings and recommendations to the European Commission, expected by July 2026.

Background to the Reporting IR

• The Reporting IR confirms that the current transaction reporting landscape across the EU²⁸ imposes significant operational and financial burdens due to overlapping requirements, fragmented reporting channels, and duplicative compliance obligations. ESMA outlined four potential simplification scenarios within the CfE, of which two have received clear stakeholder support and will proceed to further assessment.

Short-Medium Term: Proposed Option 1a (Derivative Type Delineation)

• Option 1a proposes a delineation based on instrument type, with over-the-counter derivatives (OTC) to be reported exclusively under the European Market Infrastructure Regulation (EMIR) and exchange-traded derivatives (ETDs) reported under the Markets in Financial Instruments Regulation (MiFIR).²⁹
• In response to the CfE, which demonstrated broad support for the proposal whilst raising concerns regarding the often unclear delineation between ETDs and OTC derivatives, ESMA has reviewed and proposed three sub-variants of Option 1a to deliver a more precise proposal:

1. Option 1ai (with schema changes): This sub-variant includes a clear delineation between ETD and OTC derivatives with a corresponding change to the reporting schema to implement the split reporting framework outlined above. It also expands mandatory delegated reporting to all counterparties and removes the associated reconciliation process.
2. Option 1aii (without schema changes and no delineation): This sub-variant does not implement a delineation between ETDs and OTC derivatives. It expands mandatory delegated reporting to all counterparties while retaining the associated reconciliation process.
3. Option 1aiii (without schema changes and delineation): This sub-variant implements a more partial split between ETDs and OTC derivatives. Specifically, it excludes “EU ETDs” from EMIR reporting requirements, in line with global standards, while maintaining the current MiFIR scope for OTC derivatives. It expands delegated reporting to all counterparties and removes the associated reconciliation process.

• Each sub-variant is intended to facilitate progression toward the comprehensive “Report Once” framework envisaged under Option 2a.

Longer Term: Proposed Option 2a (“Report Once” Framework)

• This longer-term proposal, with an estimated implementation timeline of five to seven years, envisions full integration of MiFIR, EMIR and the Securities Financing Transactions Regulation (SFTR) into a single reporting framework. Under Option 2a, the same derivative trade would be reported once to one system, to satisfy all regulatory obligations.
• Implications for Investment Managers: Investment managers currently subject to multiple transaction reporting obligations under MiFIR, EMIR and SFTR should monitor these developments closely. The proposed simplification could significantly reduce reporting burdens and associated compliance costs. Managers should consider engaging with ESMA’s consultations to ensure the final framework addresses the practical challenges faced by the investment management industry.

9. FCA Launch: The UK’s First Bond Consolidated Tape - Implications for Investment Managers

• On 22 June 2026, the FCA announced the launch of the UK bond consolidated tape, operated by ETS Connect UK, providing investors and market participants with a single, real-time source of prices and trading activity across the UK bond market for the first time.³⁰ The UK is the first jurisdiction outside North America to launch a consolidated tape for bonds, representing a significant development for investment managers active in UK fixed income markets.³¹
• The launch builds on changes to the UK’s bond market transparency rules that came into force in December 2025. The service launches with 98% market coverage of in-scope bond trading and covers post-trade transparency data for bonds admitted to trading on UK venues; exchange-traded notes and exchange-traded commodities are excluded from scope. The FCA will supervise ETS Connect UK throughout its five-year contract against standards on data quality, completeness and timeliness.
• Implications for Investment Managers: Managers should review their trading and best execution arrangements to ensure they are making appropriate use of the consolidated tape data. The 98% market coverage provides a comprehensive view of UK bond market activity that should support more informed investment decisions and improved transaction cost analysis.

^{1 https://bills.parliament.uk/bills/4129.}

^{[2] https://www.gov.uk/government/calls-for-evidence/financial-services-growth-and-competitiveness-strategy/outcome/financial-services-growth-and-competitiveness-strategy-overview.}

^{[3] https://www.gov.uk/government/publications/a-new-approach-to-ensure-regulators-and-regulation-support-growth/new-approach-to-ensure-regulators-and-regulation-support-growth-html.}

^{[4] https://www.fca.org.uk/publication/policy/ps26-6.pdf.}

^{[5] https://www.bankofengland.co.uk/prudential-regulation/publication/2026/april/review-of-the-smcr-phase-1-policy-statement.}

^{[6] Schedule 6, FSMA.}

^{[7] https://ec.europa.eu/transparency/documents-register/detail?ref=C(2026)2149&lang=en.}

^{[8] https://www.fca.org.uk/news/press-releases/review-financial-promotion-approvers-finds-some-firms-need-raise-standards.}

^{[9] https://www.fca.org.uk/publication/policy/ps23-13.pdf#page=47.}

^{[10] Regulation (EU) No 648/2012, as it forms part of UK domestic law and any successor legislation that applies under UK domestic law.}

^{[11] https://www.fca.org.uk/publication/handbook/handbook-notice-141.pdf.}

^{[12] Please note that financial counterparties – with the exception of small financial counterparties under EMIR Refit – are automatically subject to mandatory clearing and bilateral margin requirements, whereas non-financial counterparties become subject to these requirements only if they exceed the relevant clearing thresholds.}

^{[13] https://www.fca.org.uk/publication/consultation/cp26-8.pdf.}

^{[14] https://www.fca.org.uk/publication/consultation/cp26-16.pdf.}

^{[15] Under the Alternative Investment Fund Managers Regulations 2013 (SI 2013/1773), (as amended) (the UK AIFMD), a “full-scope” AIFM is one which exceeds the relevant sub‑thresholds (which differ according to the nature of the fund vehicle): 100 million EUR AUM including leverage across the AIFs it manages; or 500 million EUR AUM where the AIFs are unleveraged and have no redemption rights for 5 years after each investor’s initial investment. Broadly, small AIFMs follow a lighter registration and oversight regime.}

^{[16] ESMA, Press Report, Common Supervisory Action with NCAs on Compliance and Internal Audit Functions, 14 February 2026: https://www.esma.europa.eu/press-news/esma-news/esma-launches-common-supervisory-action-ncas-compliance-and-internal-audit.}

^{[17] ESMA, Final Report, CSA on Compliance and Internal Audit Functions of Fund Managers, 11 May 2026: https://www.esma.europa.eu/sites/default/files/2026-05/ESMA34-1436284137-2305_Final_Report_on_the_Common_Supervisory_Action_on_Compliance_and_Internal_Audit_Functions.pdf}

^{[18] Note, this ESMA report highlights that there are divergent national practices on whether arrangements with third parties (either for audit and/or compliance functions) qualify as delegation pursuant to the AIFMD (2011/61/EU) and UCITS (2009/65/EC) Directives and to what extent internal resources need to be maintained in these jurisdictions. In addition, AIFMs always remain responsible for ensuring compliance with applicable rules, even if the specific function is outsourced to third parties.}

^{[19] ESMA, Final Report, On the Integrated Collection of Funds’ Data, 4 May 2026: https://www.esma.europa.eu/sites/default/files/2026-05/ESMA12-2121844265-5150_Final_Report_on_integrated_reporting.pdf.}

^{[20] ESMA, Discussion Paper, On Integrated Reporting, 23 June 2025: https://www.esma.europa.eu/sites/default/files/2025-06/ESMA12-2121844265-.4904_DP_on_integrated_reporting.pdf.}

^{[21] 2009/65/EC as amended.}

^{[22] 2011/61/EU as amended.}

^{[23] 2017/1131/ EU as amended.}

^{[24] Note, this summary is indicative only with the full description of the modules to be defined in the upcoming Regulatory Technical Standards and Implementing Technical Standards.}

^{[25] The Fund Data Report highlights how the modular approach will allow the reporting obligations to be tailored and reflect the specific fund characteristics, highlighting it would capture the differences between real estate funds and liquid securities funds. In addition, smaller funds would be subject to a limited set of modules in comparison to more complex funds which would be required to provide more detailed reporting.}

^{[26] ESMA, Interim Report, On the Call for Evidence on a comprehensive approach for the simplification of financial transaction reporting, 4 May 2026:https://www.esma.europa.eu/sites/default/files/2026-05/ESMA12-1406959660-3175_Holistic_review_of_the_regulatory_reporting_-_Interim_report.pdf.}

^{Note, this summary is indicative only with the full description of the modules to be defined in the upcoming RTS and ITS.}

^{[27] ESMA, Call for Evidence, On a comprehensive approach for the simplification of financial transaction reporting, 23 June 2025: https://www.esma.europa.eu/sites/default/files/2025-06/ESMA12-437499640-3021_Call_for_evidence_on_a_comprehensive_approach_for_the_simplification_of_financial_transaction_reporting.pdf.}

^{[28] Notably under MiFIR1 for transactions in financial instruments, EMIR for derivatives transactions, and “SFTR”.}

^{[29] Note, the definition of the ETD is based on the EMIR definition and covers all derivatives executed on Regulated Markets (for more information on the definition of ETD/OTC in EMIR, see Section 2).}

^{[30] FCA, Press Release, Investors get real-time view of UK bond market activity for the first time, 22 June 2026: https://www.fca.org.uk/news/press-releases/investors-get-real-time-view-uk-bond-market-activity-first-time#:~: text=The%20UK%20is%20the%20first%20country%20outside%20North%20America%20to%20launch%20a%20consolidated%20tape%20for%20bonds.}

^{[31] Ibid.}