UK and EU Asset Management 2026 Regulatory Outlook

UK

1. UK AIFMD

A consultation paper published in early 2025 by His Majesty’s Treasury (HMT) and a parallel call for input by the UK Financial Conduct Authority (FCA) contemplated the repeal and replacement of the UK Alternative Investment Fund Managers Directive (AIFMD)-derived framework with a more streamlined regulatory framework. Principally, the proposals aim to remove the existing assets under management (AUM) thresholds by reclassifying alternative investment fund managers (AIFMs) into three categories based on the net asset value (NAV) of the Alternative Investment Funds (AIFs) under their management, with rules tailored to and in proportion with each category. The proposed thresholds are (i) NAV > £5 billion; (ii) £100 million < NAV ≤ £5 billion; and (iii) NAV ≤ £100 million.

In keeping with the aim of reducing the regulatory burden, under the new regime AIFMs will no longer need to apply to the FCA for a variation of permissions to move between the categories. Instead, AIFMs will only need to notify the FCA of their size category and if they elect to move into a higher size threshold. Other elements of the proposals include: (i) removing the requirement on UK AIFMs of UK AIFs to notify the FCA of their intention to market such AIFs prior to engaging in marketing; (ii) removing the requirement on full-scope UK AIFMs, and full-scope overseas AIFMs registered under the UK’s National Private Placement Regime, to notify the FCA of the acquisition of notifiable interests in UK non-listed companies and issuers by AIFs; and (iii) a commitment by the FCA to review the operation of the remuneration rules for AIFMs (as well as the remuneration codes for Undertakings for Collective Investment in Transferable Securities (UCITS) management companies and investment firms). The FCA and HMT intend to consult on draft legislation in early 2026.

For further detail, please view this client alert.

2. FCA Review of Conflicts in Private Markets

The FCA’s second phase of its information-gathering exercise is anticipated in Q1 2026. Firms should prepare for a deeper review of conflicts-related practices during this stage. Those that participated in Phase 1 may wish to ensure their policies, procedures and records are well organised as these could be subject to closer scrutiny.

Following the FCA’s review, firms will likely need to analyse their conclusions and implement any necessary changes during Q2 and the second half of 2026. When the FCA publishes its final feedback, all firms should assess the observations and determine if updates to their conflict frameworks are required. Internal communication with key stakeholders may be necessary to ensure alignment and readiness.

The FCA will typically provide final feedback and highlight areas for improvement. All firms should review the FCA’s final feedback and evaluate its implications for their conflict arrangements. Depending on the issues raised, updates may be required to internal policies and procedures, including conflicts registers, allocation policies and governance and oversight, including policies and procedures concerning the identification and disclosure of conflicts. In addition, likely areas of focus include employee-related policies (e.g., gifts and entertainment, outside business interests, personal account dealing, remuneration), manager and employee co-investment arrangements and investor consent processes for conflicts of interest.

Recent FCA enforcement actions and findings from previous reviews indicate that conflicts management will remain a supervisory priority throughout 2026, particularly in private markets. The broader theme of conflicts reviews was reflected by the FCA’s work on conflicts in private asset valuations last year¹. The regulatory focus on private markets is likely to continue to be an area of focus to the regulators and to HMT in 2026².

3. UK Changes to Client Categorisation

The FCA’s Consultation Paper CP25/36 on proposed changes to the UK’s client categorisation framework for investment activities will close on 2 February 2026 with final rules expected H2 2026.

Proposed changes to the elective professional client framework aim at eliminating the current distinction between Markets in Financial Instruments Directive (MiFID) and non-MiFID tests when categorising elective professionals. Under the proposals, a client must satisfy one of two criteria:

• Alternative Wealth Assessment: Replacing the “Quantitative Test” under the current regime (save in respect of local authorities), the firm verifies that the client holds investable assets—cash plus the net value of designated investments such as shares, bonds, fund units or pension interests—of at least £10 million.
• Qualitative Assessment: The firm assesses the client to establish whether it can reasonably conclude that the client can make independent investment decisions and understands the associated risks. This assessment must take into consideration key factors such as the client’s investment history, experience, financial capacity and any indicators of vulnerability.

In addition, firms must ensure the client has explicitly requested to be opted up, provided informed consent and that it complies with the Consumer Duty. The FCA’s proposals are consistent with its communications of its concerns on the appropriateness of processes firms use to confirm that an opt-up is appropriate.³

The FCA also proposes revisions to the per se professional test, including the removal of the MiFID/non-MiFID distinction for large undertakings and applying MiFID-based thresholds converted into sterling. An undertaking would need to meet two of three criteria: (i) balance sheet total of at least £20 million; (ii) net turnover of at least £40 million; and (iii) own funds of at least £2 million.

In addition, the proposals would enable fund special purpose vehicles to qualify as per se professionals where they are established or managed by another per se professional (or a group containing one) for the purpose of carrying out regulated or ancillary activities, including investing and lending.

4. T+1 settlement standard for securities trades

The government will legislate for T+1 settlement to be mandatory from 11 October 2027, following the publication of a draft statutory instrument and policy note in November 2025 which outlined its legislative approach. Under the proposed T+1 framework, trades would need to be settled within one business day after execution. Currently, trades in the UK and European Union (EU) settle as standard on a T+2 basis, but to reduce counterparty risk and engender efficiency gains in processing by market participants, it is proposed that UK trades are settled a day sooner. This is a significant development, with the FCA predicting that T+1 settlement will reduce the time to process transactions by approximately 80%: see here. The FCA has taken a proactive approach in suggesting how firms can prepare, encouraging firms to:

• Strengthen inventory management.
• Review end-to-end settlement arrangements.
• Automate where appropriate.
• Account for the differences between UK implementation and US implementation, and the complexities of a coordinated UK/Europe/Switzerland move to T+1.
• Engage clients and counterparties directly.

Comments on the draft statutory instrument are open until 27 February 2026.

5. UK EMIR

The FCA has proposed amendments to the UK European Market Infrastructure Regulation (UK EMIR) by amending the intragroup exemption regime (from the clearing obligation and margin requirements) by inserting a permanent framework for intragroup transactions. The changes are expected to be introduced in the second half of 2026 in advance of the temporary exemption expiring on 31 December 2026. By way of background, under the UK EMIR, counterparties must (i) centrally clear over-the-counter (OTC) derivatives via a central counterparty (CCP); and (ii) satisfy bilateral margin requirements for all OTC derivatives that do not require mandatory clearing.

By virtue of the UK’s Temporary Intragroup Exemption Regime (TIGER), UK counterparties can utilise three exemptions from the clearing and margin requirements, subject to satisfying certain conditions:

• A UK counterparty entering into OTC derivatives with an intragroup counterparty established in the UK.
• A UK counterparty entering into OTC derivatives with an intragroup counterparty established in a third country deemed equivalent under the UK EMIR.
• A UK counterparty entering into OTC derivatives with an intragroup counterparty established in a third country not deemed equivalent under the UK EMIR.

Ahead of the expiration of the Temporary Regime (which has already been extended to 31 December 2026), the FCA proposes to create a permanent and more proportionate regime for UK firms. To that end, in November 2025 the FCA published CP 25/30 (“Streamlining the UK EMIR Intragroup Regime”). Simultaneously, HMT published a policy note and draft statutory instrument (“The Over the Counter Derivatives (Intragroup Transactions) Regulations 2026”) for comment. The draft statutory instrument and CP 25/30 propose the following:

• Removing the need for intragroup counterparties to be established in a third country that is equivalent under UK EMIR to be able to benefit from permanent intragroup exemptions. This will allow counterparties to obtain and use intragroup exemptions with intragroup counterparties in third countries on a permanent basis as long as the relevant conditions are met.
• Streamlining the intragroup exemption process for margin and clearing to make it more user-friendly for firms to obtain and use exemptions. For example, it contemplates (i) reducing the notification period for margin exemptions from three months to 30 calendar days, beginning on the day after the FCA receives the complete notification; (ii) obviating the need for counterparties to publicly disclose their margin exemptions; (iii) removing the need for UK counterparties to notify the FCA prior to applying a clearing exemption to transactions with another UK counterparty; and (iv) removing the need for counterparties to re-notify the FCA if they wish to extend existing margin exemptions to new transactions.
• Reducing the supplementary documents (evidencing intragroup relationships and risk management) required for intragroup exemptions from the bilateral margin requirements.
• Grandfathering of the temporary exemptions already granted, such that firms currently benefitting from intragroup exemptions can use them once the current regime expires without needing to re-apply to the FCA (subject to satisfying certain conditions).

It is expected that the FCA will publish its policy statement and final rules once HMT’s draft statutory instrument has been laid before Parliament in the first half of 2026 and will be finalised over the course of 2026.

6. Short Selling Regime

Publication of the final rules in respect of the UK’s new short selling regime is expected to occur in April 2026, ahead of the main commencement date in June 2026. The FCA’s Consultation Paper from October 2025 can be found here.

To facilitate a smooth transition, the FCA has proposed a two-phase implementation to afford firms sufficient time to adapt to the new regime. Phase 1 is targeted at ensuring that systems are sufficiently robust to support the calculation of aggregate net short positions and the new Reportable Shares List, which will be necessary upon the main commencement date. Phase 2 (expected to be in December 2026) will follow six months after Phase 1 and will introduce updated FCA systems for the submission of position reports and notifications relating to the market maker exemption.

For further detail, please view this client alert.

7. SM&CR

Implementation of the first phase of reforms of the Senior Managers and Certification Regime (SM&CR) is expected in mid-2026, once the FCA and PRA have published policy statements and final rules (which are expected in Q1 2026). Any necessary legislative changes (via primary legislation) will follow from 2026 onwards. The aim is to reduce the regime’s burden whilst preserving accountability for firms.

This follows the publication of a trifecta of consultation papers (from the FCA, HMT and the Prudential Regulation Authority (PRA)) in July 2025, which closed in October 2025.

FCA: Key proposals of Consultation Paper 25/21 include:

• 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.
• Improving the operation of the 12-week rule, which allows someone to perform the role of Senior Manager without being approved. CP 25/21 proposed allowing firms to submit applications within the 12-week window, with individuals continuing to perform the role pending a decision by the FCA.
• Reducing 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.
• Allowing firms greater time to update specified FCA Directory information by extending the notification period from its current seven days to 20 days for most updates.
• Increasing the financial criteria thresholds (by approximately 30%) for becoming an Enhanced SM&CR firm: (i) AUM to increase from £50 billion to £65 billion; (ii) total intermediary regulated business revenue from £35 million to £45 million; and (iii) annual revenue generated by regulated consumer credit lending to increase from £100 million to £130 million.

HMT: HMT’s consultation proposed a package of measures which would “…enable regulators to radically streamline the SM&CR, while maintaining its role in supporting high standards in financial services firms”. Its key proposals include:

• Removing the statutory requirement for the Certification Regime and instead allowing regulators to use their rule making powers to establish a replacement regime.
• Amending the statutory definition of Senior Management Function, which would allow regulators to reduce the number of senior manager roles by providing greater flexibility to specify the list of Senior Management Functions which require regulatory pre-approval.
• Removing the requirement for pre-approval for certain roles (at the discretion of the regulator) through modification of the statutory requirement in the Financial Services and Markets Act (FSMA) that requires firms to ensure that all senior managers are subject to prior approval by a regulator.

PRA: The PRA’s Consultation Paper 18/25 contained proposals which, in its view, will “…make the regime less burdensome and more flexible, enhancing the competitiveness and growth of the United Kingdom, by lowering compliance costs and supporting the flow of international talent to the UK”, namely:

• As in the FCA’s proposals, amending the 12-week rule so that firms must submit a complete application within 12 weeks of the unforeseen departure or temporary absence of the current holder, rather than requiring that the full approval process (including regulatory approval) is completed within 12 weeks. The intended outcome is enhanced flexibility and responsiveness.
• Amending application forms (such as Form A) to extend the period for requiring a check to be undertaken from up to three months to up to six months prior to an application submission.
• Clarification of the PRA’s expectations regarding firms’ annual certification assessment, e.g., that firms have discretion when developing procedures.

The second phase of reforms are yet to be consulted on. CP 25/21 contained indicative proposals to further reduce the regulatory burden on firms:

• Providing more flexibility to appoint interim Senior Management Function roles before seeking approval by expanding the use of the 12-week rule.
• Further streamlining the Senior Management Function assessment process.
• Reducing the frequency of submission of Statements of Responsibilities, review the list of Prescribed Responsibilities, and simplify the Management Responsibilities Maps.
• Designing a streamlined regime to replace certification in a way that minimises burden and complexity while ensuring fitness and propriety of individuals.
• Removing the Directory and explore with industry alternative ways to ensure consumers have other sources of information they require.
• Streamlining Conduct Rule breach reporting.

For further detail, please view this client alert.

8. Cryptoassets rules and developments

Final draft legislation: In December 2025, the government presented the draft Financial Services and Markets Act 2000 (Cryptoassets) Regulations 2025, which once enacted will bring cryptoassets within the ambit of the FCA’s regulatory orbit. The Regulations propose to do this by amending the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, chiefly by:

• Introducing definitions of “qualifying cryptoassets” and “qualifying stablecoin” and defining a “specified investment cryptoasset” as one which satisfies the pre-existing definitions of “cryptoasset” and “specified investment” as currently located within FSMA.
• Creating a new suite of regulated activities requiring authorisation from the FCA (subject to various exclusions), which include: (i) issuing qualifying stablecoin in the UK; (ii) safeguarding and arranging safeguarding of qualifying cryptoassets and relevant specified investment cryptoassets; (iii) operating a qualifying cryptoasset trading platform; (iv) dealing in qualifying cryptoassets as principal or agent or arranging deals; and (v) qualifying cryptoasset staking.
• Mapping out the territorial reach of the regime. A firm will need authorisation in the UK (regardless of whether the firm is based in the UK or overseas) if it is involved in the sale or subscription of a qualifying cryptoasset to, or by, a UK consumer by virtue of either (i) operating a qualifying cryptoasset trading platform; or (ii) dealing in qualifying cryptoassets as principal or agent or arranges deals. Furthermore, authorisation is required if firms are carrying out certain regulated activities in the UK or on behalf of a consumer in the UK (namely, safeguarding qualifying cryptoassets and relevant specified investment cryptoassets; and qualifying cryptoasset staking).
• Clarifying the public offering architecture under the new regime, including a general prohibition on public offers of qualifying cryptoassets subject to certain exemptions, for example offers in denominations of at least £100,000; offers to qualified investors only; offers to fewer than 150 people in the UK other than qualified investors; and offers made in the UK where the total consideration is no more than £1 million or equivalent currency.
• Creating a bespoke market abuse regime for cryptoassets via (i) formulating new designated activities (the use and disclosure of inside information, and market manipulation) under FSMA in relation to qualifying cryptoassets; and (ii) defining “market abuse” to encompass insider dealing, the disclosure of inside information, and market manipulation. Its intention is to encapsulate activities relating to relevant qualifying cryptoassets in and outside the UK, regardless of whether they occur on a qualifying cryptoasset trading platform.

This new regime is expected to come into effect from 25 October 2027. The time lag between the recent publication of the legislation and the full commencement date allows the FCA (and where necessary, the PRA) to develop and issue guidance on the above.

Consultation Papers: In tandem with this, the FCA has published three separate but interlinking consultation papers:

• Regulating Cryptoasset Activities (CP 25/40): In light of the new range of cryptoasset activities as contemplated by the legislation above, the FCA sets out its proposed rules and guidance for some of the new cryptoasset regulated activities. The consultation is open until 12 February 2026.
• Admissions & Disclosures and Market Abuse Regime for Cryptoassets (CP 25/41): Examines the rules and guidance for the implementation and operation of the cryptoassets admissions & disclosures regime and the market abuse regime for cryptoassets. Both regimes are to be introduced via the Designated Activities Regime under Part 5A of FSMA. The consultation is open until 12 February 2026.
• A prudential regime for cryptoasset firms (CP 25/42): Lays out the proposed prudential requirements for authorised cryptoasset firms, accounting for the new cryptoasset activities introduced via the legislation above (i.e., operating a qualifying cryptoasset trading platform, staking, arranging deals, dealing as agent and dealing as principal in qualifying cryptoassets). It expands the scope of the proposals as envisioned in an earlier consultation paper, CP 25/15, which had introduced new prudential sourcebooks (the Core Prudential Sourcebook (COREPRU) and Crypto Prudential Sourcebook (CRYPTOPRU)) for cryptoasset firms. For example, CP 25/42 covers (i) concentration risk; (ii) permanent minimum requirement of funds which a cryptoasset firm should maintain; (iii) public disclosure of prudential information; and (iv) capital and liquidity planning and stress testing. The objective of CP 25/42 is to develop proportionate prudential standards that support the development of cryptoasset markets in the UK whilst maintaining appropriate regulatory rigour in the market. The consultation is open until 12 February 2026.

For further detail, please view this client alert.

9. Enforcement “Naming and Shaming”

For the past couple of years, the FCA has indicated its desire to name publicly more firms at an early stage of the investigative process. Whilst the FCA’s most aggressive proposals in this regard received market and Parliamentary criticism and were ultimately not put into effect, the FCA still retains the power to make statements about the commencement of an investigation on a “named” basis in “exceptional circumstances”.

The FCA has recently made such an announcement, in relation to the opening of an investigation into a Claims Management Company for the mis-selling of services relating to car finance claims. The FCA proposed to name The Claims Protection Agency Limited (TCPA) at a point near the commencement of its investigation and before any (possible) finding of wrongdoing could be made.

TCPA challenged the FCA’s decision to publish its name by way of judicial review and the FCA was successful in defending its decision through the courts. The FCA convinced the High Court that its investigation in this particular case met the “exceptional circumstances” test, particularly on the grounds that it was in the interest of the firm’s customers to know about the investigation at an early stage.

This demonstrates the regulator’s continued appetite to publicise the fact that it has opened an investigation and, if appropriate, firms should be prepared to challenge such FCA proposals at short notice.

EU

1. AIFMD II

Member States have until 16 April 2026 to implement the changes to the AIFMD as introduced by the AIFMD II. The AIFMD II incorporates changes which include:

• Expansion of pre-investment and periodic disclosures under Article 23.
• Expansion of Annex IV reporting under Article 24, including in respect of delegation arrangements.
• More permissive depositary arrangements.
• Changes to the preconditions for marketing of funds under private placement regimes.
• New loan origination regime.
• New requirements for liquidity management and risk monitoring.

For further detail, please view this client alert.

2. EMIR III

The EMIR III amending Directive (Directive (EU) 2024/2994) must be transposed into local law by member states by 25 June 2026. ESMA expects that reporting by entities subject to the active account requirement will be provided by July 2026, with such submissions to include any backlog data which will demonstrate compliance with the active account requirement for the period starting 25 June 2025, along with data for 2026. Moreover, having conducted a consultation in respect of its draft RTS regarding participation requirements for CCPs, ESMA expects to submit the finalised version to the European Commission for endorsement by the end of Q1 2026.

By way of recap, the key measures of the Directive and the complementary Regulation (Regulation (EU) 2024/2987) include:

• Active account requirement: Financial counterparties and non-financial counterparties must maintain at least one active direct or indirect clearing account with an EU central counterparty. Significantly, this only applies where positions in OTC derivative contracts exceed the relevant threshold in respect of (i) interest rate derivatives denominated in EUR and Polish zloty; and (ii) EUR-denominated short-term interest derivatives.
• Intragroup transactions exemption: The exemption from clearing and margin requirements for intragroup transactions is no longer contingent on European Commission equivalence where group entities are based in third countries. Instead, it is sufficient that parties are not based in an “excluded jurisdiction”, namely a jurisdiction: (i) identified as high-risk with strategic deficiencies in its anti-money laundering (AML) and counter-terrorist financing regime; (ii) on the EU list of non-cooperative tax jurisdictions; or (iii) otherwise identified by the Commission in a delegated act.
• Intragroup transactions reporting exemption: The intragroup exemption from reporting requirements will continue to be available where the criteria are met. This requires that at least one of the parties is a non-financial counterparty (even if an EU entity) but will apply where its parent undertaking is established in a third country which includes the UK. Note also that even where an EU parent uses this exemption, it must report, on a weekly basis, the net aggregate positions by class of derivatives of that non-financial counterparty to its national competent authority.

3. MiFID II

Following consultation by the European Commission on Delegated Directive (EU) 2017/593, rules in respect of the provision of third-party execution and research services to investment firms that provide portfolio management or other investment or ancillary services will come into effect from 6 June 2026.

When the MiFID II (Directive 2014/65/EU) became effective in 2018, investment firms were no longer able to pay jointly for the provision of research and execution services (i.e., bundled payments). Unbundling the two meant that the cost of research was separated from other services (such as execution) provided to the investment firm. Recognising that this obligation to pay separately for research and execution services has damaged the research ecosystem (due to dampened demand for those research services), Directives (EU) 2021/338 and (EU) 2024/2811 amended MiFID II to offer investment firms greater flexibility as how they could pay for their execution services and research. Such changes included (i) removing the overly restrictive option which allowed firms to bundle payment for research and execution services only when research related to companies with a market capitalisation not exceeding 1 billion EUR (such an exemption not applying to companies with a higher market capitalisation); and (ii) introducing transparency requirements obliging investment firms to disclose to their clients whether they use joint or separate payments.

Broadly, the suggested alterations to the Delegated Directive would allow investment firms to choose between joint or separate payments for investment research and execution services. Finally, there is provision that irrespective of how the investment firms pay for execution and research services, it is incumbent on Member States to ensure that investment firms base their annual assessment of the research on robust quality criteria.

For further detail on the UK regime, please view this client alert.

4. EU MiCA

Pursuant to Article 143(3) (“Transitional measures”) of the Regulation (EU) 2023/1114 Markets in Crypto-Assets Regulation, cryptoasset service providers that provided their services in accordance with applicable law before 30 December 2024 may continue to do so until 1 July 2026 or until they are granted or refused an authorisation pursuant to Article 63, whichever is sooner. Note that it is at the discretion of member states to derogate from this transitional regime by opting not to apply this transitional period or reducing its length (if in their view their national regulatory framework is less stringent than the Regulation). In December 2025, ESMA published an updated list of member states’ grandfathering periods, which was notable for Spain’s increase in its grandfathering period from 12 months to 18 months.

This should be seen in the context of the publication of an “ESMA Statement on MiCA Transitional Measures” on 4 December 2025. This reaffirmed that member states have discretion in choosing to apply the transitional regime, or to reduce its duration “…in view of fostering financial stability and investor protection”. Aimed at investors, it reaffirms that entities active in providing cryptoasset services after the end of the transitional period are not guaranteed to be authorised under MiCA, and that some transitional periods have already come to an end or will do so shortly.

If you have questions about this client alert, please contact any Akin lawyer or advisor below.

^{1 Financial Conduct Authority, “Multi-Firm Review: Private Market Valuation Practices”, March 2025.}

^{2 House of Lords Financial Services Regulation Committee report, “Private markets: Unknown unknowns”, January 2026.}

^{3 See, for example, the recent decision in Linear Investments Limited v Financial Ombudsman Service Limited [2025] EWCA Civ 1369.}