January 2026 – February 2026: EU/UK Regulatory Round-Up

Executive Summary

This Regulatory Round‑Up highlights a selection of significant Financial Conduct Authority (FCA) regulatory developments during January and February 2026 that are most relevant to asset managers, including:

The FCA has consulted on changing the definition of “professional client”. We await the outcome of the consultation and any final proposals the FCA may enact.
Update to Stewardship Code.^1,2 For the first time since 2020, the Financial Reporting Council’s Stewardship Code has been reissued as the Stewardship Code 2026.
ESMA’s Final Report on the draft technical standards under EMIR III, including revised methodology and threshold levels for clearing obligation assessments, with significant implications for how financial and non‑financial counterparties calculate and monitor their over-the-counter (OTC) derivative exposures.³
FCA and PRA consultations on reforming the UK securitisation framework, proposing streamlined due‑diligence requirements, simplified transparency rules and added flexibility in risk‑retention options, with a view to revitalising UK issuance and reducing compliance burdens.⁴
HMT’s consultation on reforming the Appointed Representatives regime, including a proposed “principal permission” gateway, extended FOS jurisdiction and the introduction of Senior Managers and Certification Regime (SM&CR) for Appointed Representatives (Ars), signalling a more structured and accountable oversight model.⁵
FCA Handbook change extending the UCITS “concentration rule” transitional period.⁶
An update on recent FCA enforcement actions.

1. Consultation on changing the definition of “Professional Client”

As trailed in our previous client alert,7 the FCA’s Consultation Paper CP 25/36 (“Client categorisation and conflicts of interest”)⁸ proposes to amend the definition of “professional client” in the FCA Handbook, particularly to change the tests about who may be permitted to elect to be treated as a professional client.

These proposals have several strands, including:

Introducing an alternative route for very wealthy individuals to opt out of retail protections, particularly where the client has investable assets of at least £10 million.
Removing the “quantitative test”, whereby a client can be opted up if they satisfy two out of three criteria (namely, (i) where the client has carried out significant size transactions on the relevant market at an average frequency of 10 per quarter over the last 4 quarters, (ii) the size of the client’s financial instrument portfolio exceeds EUR 500,000, or (iii) the client works, or has worked, in the financial sector for at least one year in a professional position which requires knowledge of the transactions or services envisaged). The FCA has suggested that this is open to misuse.
An “Enhanced Qualitative Assessment”, such that firms would still be required to undertake a robust qualitative assessment of a client’s expertise, experience and knowledge before they are opted up.
Improving the safeguards around opting up, including ensuring that the client has actively requested this and given their informed consent to opt out of all retail protections.

These proposals would at once allow additional flexibility in some circumstances, whilst potentially requiring greater care and documentation when a firm does want to opt up a client to professional status.

The consultation closed in February 2026, and it is not yet known when the FCA’s response may be, but it might be expected during the course of 2026.

2. Stewardship Code 2026

The UK Financial Reporting Council (FRC) has promulgated a new Stewardship Code 2026,9 which replaces the Stewardship Code 2020. In general, the obligations under the revised code are lighter, with a more flexible set of reporting obligations.

As explained in our previous client alert, asset managers are required to develop and publicly disclose policies on shareholder engagement in accordance with the Conduct of Business Sourcebook.¹⁰ As part of this set of disclosures, firms are required to disclose clearly on their website (or in some other accessible form), the nature of its commitment to the FRC’s Stewardship Code, or where it does not so commit explain its alternative investment strategy.¹¹ Given the updates to the Stewardship Code, firms should be considering whether their statements to this effect need to be renewed or amended.

Helpfully, the FCA has confirmed that the FRC’s inclusion of “sustainable” in the new definition of “stewardship” does not conflict with the FCA’s Sustainability Disclosure Requirements (SDR) regime,¹² and so there is no conflict with the obligations under the SDR rules.

Client impact?

Firms should ensure that they are familiar with the updated Stewardship Code 2026, and assess any disclosures made to ensure that they reflect the updated document.

3. EMIR III

The European Securities and Markets Authority (ESMA) published its Final Report on 25 February 2026, submitting draft Regulatory Technical Standards (RTS) to amend Commission Delegated Regulation (EU) No 149/2013. This follows ESMA’s earlier consultation paper published in April 2025. These technical standards implement requirements under Regulation (EU) 2024/2987 (EMIR III), which became applicable on 24 December 2024. EMIR III amended Regulation (EU) No 648/2012 (the European Market Infrastructure Regulation, EMIR), which governs OTC derivatives, central counterparties and trade repositories across the EU.

The key proposals include:

New methodology for calculating clearing thresholds:
For Financial Counterparties (FCs), in determining whether they reach the clearing threshold or not, they would be required to calculate their uncleared position and (separately) their aggregate OTC exposure. For the FCs, this includes derivatives entered into by the group to which the FC belongs.
For Non-Financial Counterparties (NFCs), they would be required only to count their uncleared positions to determine whether they meet the thresholds or not. In accordance with EMIR III, when the new clearing thresholds take effect, NFCs will make this assessment at an entity level, and not at the group level.
Clearing Threshold Level Resetting: The clearing threshold levels would be amended to be calculated in accordance with the new calculation methodologies. The new thresholds would be for uncleared OTC derivatives at EUR 800 million for credit derivatives, EUR 700 million for equity derivatives, EUR 2.2 billion for interest rate derivatives, EUR 3 billion for FX derivatives and EUR 4 billion for commodity and emission allowance derivatives. As noted above, for FCs, there would also be aggregate limits for OTC contracts set as EUR 1 billion for credit derivatives and EUR 3 billion for interest rate derivatives.

Client impact?

As and when the amending regulation is enacted and takes effect, firms will have to reassess whether or not they meet the clearing thresholds.

Next steps?

It is not known when the amending regulation will take effect, but the amendments will come into effect 20 days after publication in the Official Journal. As such, firms may need to make the renewed assessments promptly.

4. Securitisation: Consultation on an overhaul of the UK framework

On 17 February 2026, the FCA published Consultation Paper CP26/6 13 (“Rules for reforming the UK Securitisation Framework”), alongside a parallel PRA Consultation Paper CP2/26¹⁴ (“Reforms to securitisation requirements”), setting out proposals to streamline and update the UK’s securitisation regime. This initiative is part of broader post-Brexit reforms to tailor UK financial regulations to reduce unnecessary burdens while maintaining high standards of investor protection. Both CP26/6 and CP2/26 are open until 18 May 2026.

Key proposals include:

Simplifying due diligence requirements: The proposals would permit institutional investors to have more flexibility in how they conduct due diligence. If the proposals move forward, institutional investors would not need to verify compliance with UK rules or similar standards, but rather satisfy a broader obligation to assess the risks involved in the securitisation to confirm that it meets the investor’s risk appetite and maintains a sufficient alignment of interests between the manufacturer (originator/sponsor) and the investor.
Streamlining of transparency requirements: The number of mandatory disclosure templates would be reduced, and a new, bespoke template is proposed for collateralised loan obligations (CLOs). UK issuers would also no longer be required to report data to regulated securitisation repositories. The rules would no longer distinguish between “public” and “private” transactions for transparency purposes, creating a unified regime for all securitisations.
Risk retention: Other notable changes include introducing an additional “L-shaped” risk retention option—a hybrid method where securitisation sponsors/originators retain a combination of a first-loss tranche with the residual risk retained by holding the remaining tranches in equal proportion. This added flexibility would align UK rules with practices in other markets and potentially facilitate cross-border deals.
Re-securitisations: The regulators propose to allow two types of re-securitisations, namely (i) the securitisation of securitisation positions which are constituted by one exposure and its related credit protection, and (ii) the securitisation of the senior most securitisation positions.
Clarification of credit-granting standards: The clarifications would include stating that sound and well-defined criteria for granting credit would have to apply to any exposure to be securitised, regardless of whether other non-securitised exposures exist, and removing the term “non-securitised exposures” from the relevant part of the FCA Handbook to be replaced with a clearer term (“comparable assets remaining on the balance sheet, if any”).

Client impact?

For institutional investors (such as asset managers, banks and insurers), the reforms promise a more flexible and proportionate compliance regime. Investors would no longer be constrained by some of the specific requirements currently imposed on due diligence checks and re-securitisations. For originators and sponsors, the streamlined transparency and reporting rules are likely to reduce operational burdens associated with issuing securitisations.

Next steps?

18 May 2026: Consultation closes.
H2 2026: Rules expected to be finalised, with enabling legislative adjustments by the Treasury, as needed, to implement certain changes.

Firms involved in securitisations—whether as issuers, investors, or service providers—may wish to respond to the consultation, and firms should be ready to amend their processes in due course if the changes take effect.

5. Appointed Representatives: HM Treasury targets AR regime overhaul

On 12 February 2026, the Treasury opened a consultation on reforming the UK AR regime, with comments due by 9 April 2026. The AR model allows firms to offer regulated services without direct authorisation from the FCA. However, concerns about poor oversight and higher consumer risk in some AR arrangements have prompted the Treasury to propose legislative changes, building on the FCA’s own recent tightening of AR supervision.

Proposals include:

Principal permission – Authorised firms would need a specific FCA permission for taking on ARs: A new permission would be added, which would allow the FCA to assess firms’ abilities to take on ARs in advance of their doing so. It is not proposed that firms which already have ARs would need to reapply for permission.
Consumer redress: The jurisdiction of the Financial Ombudsman Service (FOS) would extend to cover complaints against an AR directly in cases where the AR’s principal cannot be held responsible.
Senior Managers & Certification Regime (SM&CR): ARs currently are not within the SM&CR, but the new proposals would bring them within scope. Principal firms would need to certify AR individuals as fit and proper, and there is a proposal to introduce a Senior Manager Function for a principal firm of being responsible for AR oversight.
Repeal of the tied agent category: “Tied agents” are the Markets in Financial Instruments Directive (MiFID) firm terminology for ARs. The Treasury proposes bringing tied agents into the AR regime.

Client impact?

Principal firms and ARs should anticipate greater scrutiny regarding their arrangements, potentially with additional regulatory obligations. Firms may wish to respond to the consultation.

Next steps?

9 April 2026: Consultation closes after 8 weeks.
Thereafter the Treasury will consider the responses, with any new regime coming into force in 2026, 2027 or later.

6. Funds: UCITS concentration limits – transitional period extended (COLL)

In January 2025, the FCA made amendments to Chapter 5 of the Collective Investment Sourcebook (COLL) to change the concentration limits permitted for a UCITS scheme. In particular, they changed the 25% limit on units in a collective investment scheme to being a restriction on investing more than 25% in a collective investment scheme which is not an umbrella or a sub-fund, or a sub-fund of an umbrella. They also changed this limit for certain “authorised funds” managed by the same “authorised manager” as the UCITS itself. This change was intended to be subject to a one-year transitional period, but in January 2026 the FCA extended this until 31 January 2027.

7. Enforcement Updates

Carillion plc and Associated Individuals

In February 2026, the FCA published a Final Notice censuring Carillion plc for contraventions of the Market Abuse Regulation and the Listing Rules, relating to the publication of misleading information to the market. Given Carillion’s financial circumstances, the FCA did not impose a fine, but announced that they would otherwise have imposed a financial penalty of more than £37 million.15 The misstatements related to the financial results and other announcements published by the firm, which were held to have been misleading and that they were made recklessly.

This coincides with withdrawals of references to the Tribunal which three members of Carillion personnel, Mr. Adam, Mr. Khan, and Mr. Howson, had made, relating to decision notices which had been issued to them some time ago proposing to fine them individually. These individuals have now benefited from reductions in their penalties.¹⁶ These reductions in their penalties are on the basis of the FCA agreeing to a 10% discount for the assistance they have given, as well as, for Mr. Adam and Mr. Howson, a further reduction on account of the FCA accepting that their relevant income was lower than had previously been determined.

Market Abuse Cases

The FCA has pursued a number of market abuse cases recently against individuals.

In a case against Russel Gerrity, the FCA has fined him £309,843 (after a 30% settlement discount) for insider dealing.¹⁷ Mr. Gerrity was an experienced petrophysical consultant who had information relating to drilling results at oil wells whilst he traded in shares of two petrochemical companies. The FCA found this to be insider dealing and therefore imposed a financial penalty. The FCA’s Final Notice sets out forensically its determinations of precisely what information Mr. Gerrity had and when, and serves as a reminder to the level of detail the FCA is willing to analyse to pursue a case involving market abuse.

The FCA has also imposed penalties against Mr. Bhavesh Hirani¹⁸ and Mr. Dispesh Kerai,¹⁹ in relation to trading undertaken by Mr. Hirani using an online account he opened in Mr. Kerai’s name whilst he was in possession of inside information relating to Bidstack Group plc. The FCA found that Mr. Kerai provided funds and assistance to Mr. Hirani’s trading, and the intention was to distance Mr. Hirani’s name from the insider dealing. Mr. Hirani was fined £56,000 (subject to a 30% settlement discount), and Mr. Kerai was fined £52,731 (also subject to a 30% discount).

^{1 https://www.frc.org.uk/library/standards-codes-policy/stewardship/uk-stewardship-code/.}

^{2 https://www.fca.org.uk/firms/climate-change-and-sustainable-finance/sustainability-disclosure-requirements-sdr-regime.}

^{3 ESMA – “Final Report: On the draft technical standards amending Regulation (EU) 149/2013 to further detail the new EMIR clearing thresholds regime” (25 February 2026): https://www.esma.europa.eu/sites/default/files/2026-02/ESMA74-1049116226-944_Final_Report_on_the_draft_technical_standards_amending_Regulation__EU__1492013_to_further_detail_the_new_EMIR_clearing_thresholds_regime.pdf.}

^{4 PRA – “CP2/26 – Reforms to securitisation requirements” (17 February 2026): https://www.bankofengland.co.uk/prudential-regulation/publication/2026/february/reforms-to-securitisation-requirements-consultation-paper; FCA – “CP26/6: Rules for reforming the UK Securitisation Framework” (17 February 2026): https://www.fca.org.uk/publications/consultation-papers/cp26-6-rules-reforming-uk-securitisation-framework.}

^{5 HMT – “Consultation: The Appointed Representatives Regime” (12 February 2026): https://www.gov.uk/government/consultations/consultation-the-appointed-representatives-regime/consultation-the-appointed-representatives-regime.}

^{6 FCA – “Collective Investment Schemes Sourcebook (Concentration Limits) Instrument 2026 (FCA 2026/1)” (effective 29 January 2026): https://api-handbook.fca.org.uk/files/instrument/COLL/FCA%202026/1-2026-01-29.pdf.}

^{7 https://www.akingump.com/en/insights/alerts/uk-and-eu-asset-management-2026-regulatory-outlook.}

^{8 https://www.fca.org.uk/publication/consultation/cp25-36.pdf.}

^{9 https://www.frc.org.uk/library/standards-codes-policy/stewardship/uk-stewardship-code/.}

^{10 https://handbook.fca.org.uk/handbook/cobs2?timeline=true.}

^{11 https://handbook.fca.org.uk/handbook/cobs2?timeline=true, see COBS 2.2.3 R.}

^{12 https://www.fca.org.uk/firms/climate-change-and-sustainable-finance/sustainability-disclosure-requirements-sdr-regime.}

^{13 https://www.fca.org.uk/publication/consultation/cp26-6.pdf.}

^{14 https://www.bankofengland.co.uk/prudential-regulation/publication/2026/february/reforms-to-securitisation-requirements-consultation-paper.}

^{15 https://www.fca.org.uk/publication/final-notices/carillion-plc-in-liquidation-2026.pdf.}

^{16 https://www.fca.org.uk/publication/final-notices/richard-adam-2026.pdf, https://www.fca.org.uk/publication/final-notices/zafar-khan-2026.pdf, and https://www.fca.org.uk/publication/final-notices/richard-john-howson-2026.pdf.}

^{17 https://www.fca.org.uk/publication/final-notices/russel-gerrity-2025.pdf.}

^{18 https://www.fca.org.uk/publication/final-notices/bhavesh-hirani-2026.pdf.}