U.K. and E.U. Regulatory Update - January to March 2026

Key Regulatory Updates

Consumer Composite Investments

Following the FCA’s publication of final rules on Consumer Composite Investments (CCIs) in December 2025, FinDatEx confirmed that it will begin work on reviewing the EMT and EPT to accommodate UK-specific CCI changes. 

This review will focus only on the UK-specific elements necessary to support the transition from the PRIIPs KID and UCITS KIID to the new CCI framework. FinDatEx expects to publish revised templates early next year, giving market participants time to prepare ahead of the 8th June 2027 go-live date. 

During the last quarter, the FCA also amended the CCI transitional provisions. The following excerpt summarises the change: 

“In summary, the amendment to the transitional provision rules in DISC TP 2 corrects an inadvertent omission in DISC TP 2.11R(1), which should also have referenced products falling in DISC TP 2.2R(4)(a), for which a disclosure document is not currently required. This is to ensure that closed-ended investment companies that are listed in the UK can, as intended, benefit from a transitional period not only for the DISC rules but also in relation to rules in other sourcebooks that have been consequentially amended to reflect DISC requirements.” 

Further detail is set out in Handbook Notice 139 and FCA 2026/18.

For more information from FinDatEx you can read  Upcoming review of EMT & EPT in relation to the UK FCA's CCI rules

Alternative Investment Fund Managers Directive II

The 16^th April 2026 is the deadline for EU Member States to transpose rules into national law and the official application date for most provisions. This quarter saw a number of important implementation developments, particularly in Luxembourg and Ireland. 

In Luxembourg, Parliament adopted legislation transposing AIFMD II into local law with market commentary broadly describing Luxembourg’s approach as pragmatic, closely aligned with the EU framework and without material gold-plating. 

The main areas of change under AIFMD II include:

• Liquidity management tools (LMTs): open-ended AIFs will be required to select and maintain at least two liquidity management tools from the harmonised EU list, supported by appropriate disclosures, policies and notification procedures.
• Loan origination: a new harmonised framework applies to loan-originating AIFs, including concentration limits, leverage caps, risk retention requirements and additional rules for open-ended structures.
• Delegation and governance: AIFMs face enhanced oversight obligations in relation to delegates and sub-delegates, stricter substance expectations, and additional governance and operational requirements.
• Disclosure and reporting: AIFMs will need to provide greater transparency on fees, charges, expenses and, where relevant, loan portfolio composition. 

Luxembourg has also clarified certain national options under the Directive. In particular, loan-originating AIFs will not be permitted to grant loans to consumers in Luxembourg, although this does not prevent Luxembourg AIFMs from carrying out such activity in other jurisdictions where permitted by local law. Luxembourg is also not eligible to activate the new EU depositary passport for Luxembourg-domiciled AIFs. 

In Ireland, the Central Bank published a streamlined authorisation process for AIFMs that already manage loan-originating AIFs and need approval for the new Annex I activity of originating loans on behalf of an AIF. As there are no grandfathering provisions for this additional function, AIFMs managing loan-originating QIAIFs will need the required authorisation in place by 16th April 2026 in order to continue those activities. 

More broadly, AIFMD II is also relevant to non-EU firms, including UK managers, particularly where they market into the EEA under national private placement regimes or act as delegates to EU AIFMs. Areas likely to require attention include expanded Annex IV reporting, delegation documentation,  disclosures and compliance with updated third-country marketing conditions. 

For more information on AIFMD II implementation you can find more details in the following documents:

DIRECTIVE (EU) 2024/927 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

JOURNAL OFFICIEL DU GRAND-DUCHÉ DE LUXEMBOURG - Bill No 8628

Law of 17 December 2010 relating to undertakings for collective investment

Law of 12 July 2013 on alternative investment fund managers

Authorisation process note: AIFMs engaging in loan origination - AIFMD II implementation (updated)

European Union Updates

Retail Investor Journey and Retail Investment Strategy

The European Securities and Markets Authority (ESMA) has published the outcome of its 2025 Call for Evidence on the retail investor journey under MiFID II. Based on stakeholder feedback, ESMA has identified a number of areas where it intends to support simplification and improve retail investor access to capital markets. 

ESMA will focus its follow-up work on three key areas:

• Streamlining disclosure requirements and reducing information overload for investors.

• Reducing complexity in suitability and appropriateness assessments.

• Simplifying MiFID II requirements on sustainability preferences. 

Consumer testing will also be used to help inform improvements to disclosures and digital investor journeys, including for mobile-first users. 

The report will inform ESMA’s future technical advice on MiFID II delegated acts and potential updates to its guidelines, all of which will continue to be aligned with the final outcome of the Retail Investment Strategy (RIS). 

For more information you can read ESMA’s report on the retail investor journey here:

ESMA sets out actions to simplify the retail investor journey and make investing more accessible 

There were also wider market discussions during the quarter around the direction of the RIS. Commentary suggests that inducements remain one of the most debated areas, with concerns continuing about whether the package will truly improve retail participation or instead add complexity. Although political agreement was reportedly achieved on parts of the RIS in late 2025, technical work is still ongoing.

MiFID II and Transparency

ESMA published the results of its annual transparency calculations for equity and equity-like instruments, which will apply from 6th April 2026. 

The published calculations include:

• Liquidity assessments.
• Determination of the most relevant market in terms of liquidity.
• Average daily turnover for large in scale threshold calculations.
• Average transaction values and related standard market size.
• Average daily number of transactions for the tick-size regime. 

ESMA has reminded market participants to continue monitoring the transparency calculations on a daily basis, particularly for newly traded instruments. 

In a separate simplification measure, ESMA has also withdrawn its guidelines on MiFID II / MiFIR obligations on market data with immediate effect. This reflects the fact that the new regulatory technical standards on reasonable commercial basis (RTS on RCB) are now in force. Market data providers authorised before 23rd November 2025 benefit from a transition period until 22nd August 2026 to align their contractual arrangements. 

For more details on the transparency calculations you can read more here:

ESMA – ESMA publishes the results of the annual transparency calculations for equity and equity-like instruments

For the market data update you can access ESMA’s decision here:

ESMA - Decision on the withdrawal of guidelines on the MiFID II/ MiFIR obligations on market data

FinDatEx – EMT Version 4.3

FinDatEx released version 4.3 of the European MiFID Template (EMT) on 15th January 2026. 

The update introduces three optional fields related to “Value Cost Advantage” (VCA), which are relevant only for structured products distributed in France:

• 11000_EMT_Data_Reporting_VCA_FR
• 11010_Used_VCA_Methodology_FR
• 11020_Hyperlink_To_VCA_Methodology_FR 

These fields are intended to support evolving regulatory expectations in France regarding the assessment of product value for structured products. FinDatEx has clarified that these VCA fields are separate from ongoing Value for Money discussions under the RIS. 

EMT V4.3 is completely optional and will coexist with previous versions. 

You can read more about the details of EMT Version 4.3 here:

FinDatEx - FinDatEx publishes EMT V4.3

Or you can directly access the EMT V4.3 template

UCITS, AIFMD and Cross-Border Funds

ESMA published its third report on marketing requirements and marketing communications under the regulation on cross-border distribution of funds. The report also includes statistics on notifications of cross-border marketing of funds. 

The report notes that:

• Luxembourg and Ireland remain the leading notifying jurisdictions, accounting for 59% and 30% of notifications respectively.
• UCITS notifications account for 56% of total notifications.
• AIFs account for 44% of total notifications. 

ESMA found that national marketing rules have not changed significantly since its previous report in 2023. 

For more details on the report you can read more here:

ESMA - Report on Marketing requirements and marketing communications under the regulation on cross-border distribution of funds 

There were also important developments in relation to liquidity management tools. Luxembourg’s regulator, the Commission de Surveillance du Secteur Financier (CSSF), confirmed that from 16th April 2026 that the following will need to select and maintain at least two liquidity management tools for each fund:

• Luxembourg UCITS funds
• Relevant management companies
• Authorised AIFMs managing open-ended AIFs

Funds cannot rely solely on swing pricing and dual pricing. Notifications to the CSSF and supporting policies and procedures will also be required.

For more information on the announcement you can read more here: Communication to the investment fund industry

Costs and Performance of EU Retail Investment Products

ESMA published its 2025 market report on the costs and performance of EU retail investment products. The report shows that ongoing costs in the EU continued to decline in 2024, although much of this reduction was driven by newer funds entering the market with lower fees. 

The key findings include:

• UCITS costs continued to fall, particularly for new equity and bond funds.
• UCITS performance improved significantly in 2024, with positive real net returns across all categories.
• ESG UCITS remained lower cost than non-ESG funds, but underperformed their non-ESG equivalents in 2024.
• AIFs remained primarily professional investor products, with retail participation declining from 14% to 9% between 2022 and 2024.
• Structured retail product costs remained broadly stable. 

The report reinforces the importance of transparency and competition in improving investor outcomes. 

You can access more information about this in the following documents:

ESMA - Market report on Costs and performance of EU retail investment products 2025

ESMA - Market report on Costs and performance of EU retail investment products 2025 - Annex

Sustainable Finance and ESG

Sustainable finance remained a major area of activity during the quarter.

ESMA published its opinion on the draft of the revised European Sustainability Reporting Standards (ESRS) developed by EFRAG. ESMA broadly supports the simplification effort but recommended targeted changes to ensure investor protection and financial stability are not undermined.

The areas where ESMA has suggested adjustments include:

• Introducing time limits to certain permanent reliefs.
• Refining requirements on transition plans.
• Strengthening reporting on sustainability competences of management and supervisory bodies.
• Enhancing transparency on financial resources allocated to sustainability actions.
• Adjusting exemptions for certain subsidiaries. 

The Commission is expected to consider ESMA’s opinion, alongside views from other EU bodies, with a delegated act expected by summer 2026. 

ESMA also issued a second thematic note on sustainability-related claims, this time focusing on ESG strategies. The note highlights greenwashing risks where terms such as “ESG integration” and “ESG exclusions” are used without sufficient explanation, and provides practical “do’s and don’ts” for firms making sustainability claims. 

For further information on the revised ESRS you can read the following:

ESMA - Opinion on the revised European Sustainability Reporting Standards

ESMA - Thematic notes on clear, fair and not misleading sustainability-related claims: ESG strategies 

There were also broader market and policy discussions around the SFDR review during the quarter. Stakeholders have continued to debate the Commission’s November 2025 simplification proposals, including whether stewardship should be more firmly embedded within the revised framework and whether fossil fuel exclusions should apply across all proposed SFDR product categories.

Tokenisation and Digital Assets

Tokenisation remained high on the agenda in Europe this quarter. 

In Luxembourg, a regulatory clarification from the CSSF confirmed that UCITS funds may hold e-money tokens, commonly referred to as stablecoins, as ancillary assets solely for the purpose of processing subscriptions and redemptions, subject to a 20% net asset value cap. This is expected to support the use of blockchain-based settlement processes for tokenised funds. 

Separately, market commentary suggested that Luxembourg has taken a more progressive stance than Ireland in relation to digital assets within UCITS structures, particularly after indications that Luxembourg UCITS may have limited indirect crypto exposure within existing eligibility frameworks. 

The Central Bank of Ireland published a discussion paper on distributed ledger technology and tokenisation in financial services. It warned that wider adoption of tokenised models could introduce new risks where functions traditionally carried out by regulated intermediaries become embedded in technology or smart contracts. Irish Funds welcomed the paper and noted that tokenisation remains a strategic priority for the industry, particularly in use cases involving money market funds and ETFs.

You can access more detail from the Central Bank of Ireland and Irish Funds here:

Central Bank of Ireland Launches Discussion Paper on Tokenisation and Distributed Ledger Technology in Financial Services

Irish Funds Welcomes Central Bank Discussion Paper on DLT and Tokenisation

United Kingdom Updates

Public Offers and Admissions to Trading Regime

On 19th January 2026, the new Public Offers and Admissions to Trading regime came into force in the U.K. The Financial Conduct Authority (FCA) used the launch of the new regime to remind consumers to exercise caution when investing in high-risk securities such as mini-bonds and loan notes.

The FCA urged consumers to:

• Check whether the firm they are dealing with is authorised.
• Understand the limits of regulatory protections where firms are not FCA regulated.
• Carry out their own research using reliable sources.
• Remain alert to investment scams and unrealistic return promises.

You can read more on the FCA’s update here:

New regime for securities and what consumers should look out for

Cryptoassets

The FCA continued to advance its crypto regulatory roadmap during the quarter. 

It launched a further consultation on rules for cryptoasset firms, described as the final step in its consultations on the future U.K. crypto regime ahead of the gateway opening in September 2026. Consultation responses are open until 12th March 2026. 

The proposals cover:

• How the Consumer Duty will apply to cryptoasset firms.
• Complaints handling and redress.
• Conduct of business standards.
• Restrictions on using credit to purchase cryptoassets.
• Training and competence requirements.
• Application of the Senior Managers and Certification Regime (SM&CR).
• Regulatory reporting requirements.
• Cryptoasset safeguarding and custody.
• Treatment of retail collateral in cryptoasset borrowing.
• Location policy guidance for cryptoasset firms. 

The FCA reiterated that crypto remains largely unregulated at present, aside from financial promotions and financial crime requirements, and reminded consumers that regulation cannot and should not remove all risk from crypto investing. 

For more detail on the consultation you can read more from the FCS here:

FCA seeks feedback on proposals for UK crypto rules

FCA seeks feedback on further rules for cryptoasset firms

Artificial Intelligence

AI remained a key regulatory focus in the U.K. during the quarter. The FCA opened applications for the second cohort of its AI Live Testing service. The initiative is designed to support firms that are ready to deploy AI in U.K. financial markets by offering tailored support on governance, risk management and monitoring. Applications are open until 24th March 2026, with testing expected to begin in late April. 

For more information you can read more from the FCA here:

Applications now open for next round of FCA’s AI Live Testing 

Separately, the Bank of England published a summary of AI roundtables held with representatives from Prudential Regulation Authority (PRA) -regulated firms. Participants generally supported the PRA’s principles-based and outcomes-based framework, with many viewing the Supervisory Statement 1/23 on Model Risk Management as sufficiently pragmatic for current AI use cases. 

The roundtables highlighted several themes:

• Firms’ second-line risk functions remain cautious, which can delay AI deployment.
• Traditional model validation frameworks may not be sustainable for increasingly complex generative and agentic AI systems.
• Firms operating internationally face increasing complexity due to different regulatory approaches across the U.K., U.S. and E.U.
• Third-party AI procurement and contractual standards remain underdeveloped.
• Data protection, data sovereignty and data quality continue to present barriers to AI deployment. 

There was also industry reporting during the quarter that the FCA is seeking views on the long-term impact of AI on retail financial services, including how AI may reshape markets, firms and consumer outcomes by 2030 and beyond. 

For further detail you can access the Bank of England’s summary here:

Summary of AI roundtables - February 2026

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Key Terms

AIF - Alternative Investment Fund

AIFMD - Alternative Investment Fund Managers Directive

CCI - Consumer Composite Investments

CSSF -  Commission de Surveillance du Secteur Financier

CRD - Capital Requirements Directive

EBA - European Banking Authority

EFRAG - European Financial Reporting Advisory Group

ESG - Environmental, Social and Governance

ESMA - European Securities and Markets Authority

ESRS - European Sustainability Reporting Standards

FCA - Financial Conduct Authority

MiFID - Markets in Financial Instruments Directive

PRA - Prudential Regulation Authority

RIS - Retail Investment Strategy

SFDR - Sustainable Finance Disclosure Regulation

SM&CR - Senior Managers and Certification Regime

UCITS - Undertakings for Collective Investment in Transferable Securities