U.K. and E.U. Regulatory Update - October to December 2025

European Union Updates

Centralised Supervision

The European Securities and Markets Authority (ESMA) chair, Verena Ross, plans to extend its oversight to stock exchanges, crypto firms, and clearing houses, marking a major move toward centralised E.U. financial supervision. She has cited inefficiencies in the current fragmented system, where national regulators duplicate efforts.

The proposal follows Mario Draghi’s 2024 report calling for ESMA to become a single E.U. - wide market regulator, akin to the U.S. Securities and Exchange Commission (SEC). Smaller member states like Luxembourg, Malta, and Ireland, along with industry groups such as European Fund and Asset Management Association (EFAMA), however oppose the idea, warning it could create an overpowered “monster” regulator.

For more details on this expansion you can read more in ESMA 2026 Work Programme or in the Financial Times article EU watchdog prepares to expand oversight of crypto and exchanges

For information about the opposition to this you can find out more in the EFAMA insight European asset managers maintain their opposition to centralised supervision or in Ignites Europe’s piece Luxembourg regulator slams Esma plan to tighten Ucits rules

On 21st October, the European Commission published its 2026 Work Programme with the following key points in the area of finance:

• Completing the Savings & Investment Union (SIU): the EC will bring forward the final set of proposals.
• Simplification, not deregulation: more than 50% of initiatives will include simplification measures, aiming to cut admin burden by 25% across the board. Competitiveness is becoming a formal policy objective.
• Digital Sovereignty: be prepared for new legislation including a Cloud and AI Dev Act and a Quantum act.

You can read more about this from the European Commission in their update Commission unveils 2026 work programme.

ESMA’s first EU-wide study of total investor costs in Undertakings for Collective Investment in Transferable Securities (UCITS) and Alternative Investment Funds (AIFs) provides a data-backed view of how management, performance, and distribution costs affect investor outcomes. It underscores persistent transparency gaps and signals stronger supervisory coordination ahead of the Alternative Investment Fund Managers Directive (AIFMD)/UCITS review.

Key Insights from the study:

• Distribution costs dominate: they represent 48% of total UCITS costs and 27% of AIFs, with wide variation across channels and countries.
• Inducements remain significant: averaging 45% of ongoing costs for UCITS and 34% for AIFs.
• Maximum fees do not equal actual fees: Packaged Retail and Insurance-based Investment Products Key Information Documents (PRIIPs KIDs) often overstate entry and exit charges.
• Transparency gaps persist: ESMA finds that fragmented disclosures across PRIIPs, Markets in Financial Instruments Directive (MiFID II) and AIFMD still make it hard for investors to get a full picture.

For more information you can access the study here, Report on total costs of investing in UCITS and AIFs

Sustainable Finance Disclosure Regulation

On 20th Nov, the European Commission has released an official draft of their SFDR simplification proposal. The changes are designed to address the current shortcomings, making the rules simpler, more efficient, and better aligned with market realities. The revised rules will be more retail-friendly and usable for companies.

What has been removed?

• Entity-level PAI reporting
• The "sustainable investment" definition
• Mandatory Taxonomy-alignment disclosures
• Portfolio Managers and advisory services are gone

What has been added?

• Three new categorisations replace Articles 8 & 9
• "Transition products" (Art. 7)
• "ESG integrated product" (Art. 8)
• "Sustainable product" (Art. 9)

You can read the press release here, Commission simplifies transparency rules for sustainable financial products or you can access the official draft document here EUR-Lex Document 52025PC0841

Alternative Investment Fund Managers Directive

On 21st October, ESMA published its long-awaited Final Report on open ended loan originating AIFs (LOFs). It sets out the conditions under which LOFs can operate as open-ended funds. According to ESMA's draft, the new rules would then apply from 16th April 2026, in line with the other changes to AIFMD made by the Amending Directive.

Discover more detail by accessing the Final Report document here Draft Regulatory Technical Standards on open-ended loan-originating AIFs under the AIFMD

International Organisation of Securities Commissions – valuation principles

The International Organisation of Securities Commissions (IOSCO) is proposing a new set of valuation principles for all funds as "there has been an increase in collective investment schemes holding less liquid and illiquid assets, including private assets". Comments on the report should be submitted by February 2026 and a final report on changes is expected by the third quarter of 2026, which could then lead financial regulators in individual jurisdictions to propose changes to local rules.

The details of the Consultation Report are available here, Valuing Collective Investment Schemes

You can also access the Final Report document here, Tokenization of Financial Assets

United Kingdom Updates

FCA Consultation on Tokenisation of Funds

The U.K. has launched new proposals for asset managers to tokenise their funds, marking its latest effort to allow companies to use blockchain technology in a bid to remain globally competitive. On 14th October, the FCA unveiled proposals for fund tokenisation under CP25/28.

The FCA’s proposals come as the regulator prepares to launch a full regulatory framework for the crypto market next year and the U.K. regulator is proposing to allow the use of a “direct to fund” model for asset managers.

You can access the FCA document here, CP25/28: Progressing fund tokenisation

For further insight into this you can read more in this Financial Times article, UK moves to allow tokenisation of investment funds

Bank of England release paper on stablecoins

The Bank of England has released a consultation paper outlining proposed rules for regulating sterling-denominated systemic stablecoins, digital tokens designed to maintain a stable value and potentially be used for payments.

The proposals aim to ensure stability and public trust as new forms of digital money emerge and complement existing payment systems.

The FCA has recently published several consultations on blockchain and crypto more generally which you can access below:

CP25/14 - Stablecoin issuance and crypto asset custody

CP25/15 - A prudential regime for crypto asset firms

CP25/25 - Application of FCA Handbook for Regulated Cryptoasset Activities

You can access the details of the consultation paper in the document here: Proposed regulatory regime for sterling-denominated systemic stablecoins

Consumer Composite Investments

On 8th December 2025, the Financial Conduct Authority (FCA) published its Policy Statement on Consumer Composite Investments (CCIs) as part of a broader package of reforms to strengthen the U.K.’s retail investment market, reinforce wholesale markets, and maintain the UK’s global competitiveness.

The new CCI disclosure regime — detailed in Policy Statement PS25/20: Supporting informed decision making — replaces the current PRIIPs and UCITS disclosure frameworks with a single, flexible approach designed for U.K. consumers. It aims to simplify how product information is presented, help consumers understand risk and return, and give firms greater freedom to innovate while remaining accountable under the Consumer Duty.

Clearer, simpler information for consumers

Under the new rules, manufacturers of CCIs — which include open and closed ended funds, structured products, contracts for difference, insurance based investment products, and other complex instruments — must produce a concise, consumer friendly product summary. This must set out key information on:

• Costs, risk, and past performance.
• Plain English explanations of what the product invests in and how it works.
• Balanced descriptions of both risk and potential return.

Distributors will provide these summaries to investors both pre sale and post sale, highlighting the information that matters most for effective and timely decisions. Firms can tailor their format and presentation so long as disclosures remain comparable across products.

The FCA’s behavioural testing found that the current templated Key Information Documents were rarely read and often too complex. In response, the CCI regime removes rigid templates to allow firms to design engaging, consumer centred communications that genuinely support understanding.

Implementation and next steps

The new regime will come into force on 8th June 2027, following an 18 month transition period beginning 6th April 2026. During this window, manufacturers may voluntarily adopt the new disclosure standards. The FCA will monitor implementation through its ongoing work on the Consumer Duty and the Financial Lives survey, tracking whether consumers find product information more readable and accessible.

By modernising disclosure, replacing outdated documentation, and strengthening the broader regulatory architecture, the FCA intends to foster a stronger UK investment culture — one where consumers invest with confidence, and firms compete on clarity, value and innovation.

You can read more in the FCA’s press release:

FCA sets out landmark package to boost UK investment culture | FCA

And in the final rules publication:

PS25/20: Supporting informed decision making – Final rules for Consumer Composite Investments

CCI Webinar On Demand

For more information about CCIs you can watch our webinar “Consumer Composite Investments Explained: What the FCA’s New Regime Means for You”.

In this session, our panel from the FCA, Hargreaves Lansdown and Broadridge discussed what the new Consumer Composite Investments (CCI) regime means for firms and investors, including its replacement of the PRIIPs regime and disclosure requirements under UCITS in the UK. The conversation highlighted the FCA’s move to a more flexible, outcomes‑focused framework and the new requirement for a concise, plain‑language Product Summary Document that sets out key costs, risks, performance and product information. The panel outlined the main technical updates—covering cost breakdowns, the revised 1–10 risk scale, and new performance disclosure formats—and explained how firms can use the regime’s flexibility to improve consumer understanding. They also discussed the 18‑month transition from 6th April 2026 ahead of the 8th June 2027 go‑live date, along with preparatory steps and the FCA’s planned support under Consumer Duty.

Access the on‑demand recording to watch the full discussion.

Key Terms

AIF - Alternative Investment Funds

AIFMD - Alternative Investment Fund Managers Directive

CCI - Consumer Composite Investments

EFAMA - European Fund and Asset Management Association

ESMA - European Securities and Markets Authority

FCA - Financial Conduct Authority

IOSC - International Organisation of Securities Commissions

KIDs - Key Information Documents

MiFID - Markets in Financial Instruments Directive

PAI - Principal Adverse Impacts

PRIIPs - Packaged Retail and Insurance-based Investment Products

SEC -Securities and Exchange Commission

SFDR - Sustainable Finance Disclosure Regulation

SIU - Savings & Investment Union

UCITS - Undertakings for Collective Investment in Transferable Securities