Buy-Side Story: The FCA's 2026 regulatory priorities for the sector

The way in which the UK Financial Conduct Authority (FCA) communicates its supervisory expectations to firms has recently changed. Back in April 2025, the regulator announced that it would stop publishing its traditional portfolio letters for different sectors and instead committed to issuing a smaller number of what it terms "market reports", setting out key priorities and insights from its supervisory work for particular types of firms.

In light of this revised approach, on 19 March 2026, the FCA published its first Wholesale Buy-Side Regulatory Priorities Report (the Report), which is aimed at traditional and alternative asset managers, as well as custody and fund service providers. As the Report is specifically tailored for the sector, firms should ensure that they have read the report and are required to confirm to the FCA that they have done so – see below.

In this briefing, we set out a brief summary of the key headline priorities identified by the FCA for the coming year and also identify key associated action points for firms. We also give our view on some interesting themes contained in the Report and what they might indicate about the FCA's near-term strategy.

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The FCA's headline priorities

In the Report, the FCA's stated headline priorities for the sector for the next 12 months are:

Reinforcing standards across private markets, focusing on management of conflicts of interest, good governance and offering retail access to private market assets in a responsible way.
Innovation and proportionate regulation, focusing on key areas such as the review of the existing AIFMD regime, finalising the framework for fund tokenisation, and proportionate and effective data collection for supervision of asset managers.
Market integrity and operational resilience, focusing in particular on how markets function during periods of stress, as well as the operational resilience of individual firms. In particular, the FCA indicates that it is likely to use further questionnaires to obtain information on firms' risk management frameworks.
Delivering good outcomes to consumers, particularly through a multi-firm review of managed portfolio services and identification of firms which may be marketing and distributing products and services without proper consideration of consumers' interests.

Given the FCA's recent supervisory work and public statements, these broad themes are unlikely to come as a particular surprise. Broadly speaking, they largely reflect a continuation of policy objectives or concerns that have underpinned a range of recent initiatives, such as the Private Markets Valuation Review, the introduction of new operational resilience rules, and the continuing focus on the implementation of the Consumer Duty.

Key action point for firms

We understand that the FCA is requiring firms to confirm, via a simple confirmation in its RegData system, that the Report has been circulated to appropriate internal stakeholders and senior management. Therefore, firms should ensure that this is circulated to the relevant individuals and that this confirmation is then provided. It appears that this confirmation must be submitted by mid-April.

Key action points for firms

Based on the FCA's key regulatory priorities above, we have grouped and summarised key action points for firms as follows:

Reinforcing standards across private markets

Private market firms should consider their general approach to risk management and any potential areas that may need improvement in anticipation of a potential FCA review in this area.
Firms should also ensure that the conclusions from the Private Markets Valuation Review have been properly considered and embedded in their valuation processes and governance.
When the output of the FCA's Conflicts Review is published (currently expected in Q3 2026), firms should also consider its findings and carry out a benchmarking exercise against any identified good or poor practices. To date, the Conflicts Review has consisted of a questionnaire sent to a sample of private market firms which seeks detailed information about how they identify and manage conflicts of interest, with further targeted follow-up requests then sent to specific firms.
The FCA also states that it expects firms to ensure that they have robust processes in place for identifying, managing and mitigating conflicts of interest. It is unclear whether the FCA is expecting firms to have taken any action before it has published the findings of its Conflicts Review (see above). It would clearly be more efficient for firms to do a single holistic review exercise, taking into account any feedback from the review. Industry associations may wish to push for further clarity from the regulator on its expectations here.
Where a firm provides products which are distributed to retail investors (and which are not otherwise exempt from the Consumer Duty), it should ensure that it has implemented the requirements of the Duty (taking into account any recent FCA guidance or supervisory statements) so that it is confident it can demonstrate that it is treating investors fairly.

Innovative and proportionate regulation

UK AIFMs should monitor for the FCA's consultation on reforms to the UK AIFMD regime (now expected in Q3 2026) and consider whether to contribute to responses (either directly or through industry associations).
All asset management firms should monitor for any FCA proposals to reform data reporting and collection (also currently expected in Q3 2026). Firms or groups which are active across multiple jurisdictions may wish to consider the extent to which broader alignment with other reporting regimes may be desirable, as the FCA has indicated that it will look to reflect global data standards where possible.
Fund managers who are considering tokenising their funds should wait for the FCA's finalised rules in this area (currently expected in Q2 2026).
Managers of authorised funds should also monitor for the output of the FCA's work on streamlining and digitising fund authorisation processes.
Note that the Report also states that the FCA will be fast-tracking the authorisation of investment funds which are focused on the defence sector, aiming to achieve an authorisation approval period of one month (reduced from the current three-month standard).
Firms that are required to produce product-level disclosures under the Task Force on Climate-related Financial Disclosures (TCFD) regime should also watch out for the FCA's consultation on streamlining those requirements (currently expected in Q2 2026).
Firms that are interested in digitisation of securities and use of distributed ledger technology (DLT) solutions should also consider whether they wish to participate in the Digital Securities Sandbox to allow them to explore tokenisation and similar innovations in a controlled regulatory environment.

Market integrity and operational resilience

Where applicable, firms should review the implementation of the FCA's operational resilience requirements (published in PS21/3) within their businesses, and all firms should review and begin implementing the latest requirements on operational incident and third party reporting in PS26/2.
More generally, the FCA expects firms to strengthen operational resilience and ensure that it is properly embedded in internal processes such as the design of new products and change management.
In light of market volatility and emerging risks, firms should review potential weaknesses in their risk management frameworks, particularly in relation to liquidity, leverage and investment concentration issues.
Given the focus on controlling risks arising from the use of AI and other advanced technologies, firms may also wish to review their control frameworks for the use of AI tools and the management of ICT risk if they have not already done so.
The FCA also expects firms to ensure that they have strong systems and controls to detect and prevent potential market abuse.
Firms should also review their cyber security capabilities and recovery processes in light of the emergence of increasingly sophisticated cyber risks.
When the FCA's final rules updating the UK transaction reporting framework are published (currently expected in Q3 or Q4 2026), firms should ensure that they review and implement these, particularly given the importance the FCA places on timely and accurate reporting. Although these are largely expected to be de-regulatory in nature, in practice this may still require updates to systems and processes.
Authorised fund managers should look out for the FCA's final rules on liquidity risk management in UCITS and NURS funds (expected in Q3 2026) and ensure that they implement the resulting requirements.

Delivering good outcomes to consumers

Private markets firms that are operating or looking to develop retail distribution channels should prepare for further FCA engagement in the coming year, as the regulator has indicated that this is likely to be a key area of focus.
Where a firm's activities fall within scope of the new Consumer Composite Investment (CCI) regime (which takes effect on 6 April 2026, subject to transitional arrangements), the firm should ensure that it has properly implemented the new rules, taking into account transitional relief where available.
All firms should monitor for the FCA's publication of its final rules on reform of the UK client categorisation framework (exact timing yet to be confirmed).
Firms within scope of the Consumer Duty should monitor for the FCA's consultation on clarifying the scope of the Duty across distribution chains and in relation to the activities of predominantly wholesale firms (currently expected towards the end of Q2 2026).
Firms that are subject to the FCA's Sustainability Disclosure Requirements (SDR) product labelling regime should look out for further FCA engagement supporting the implementation of those requirements.
Depositaries should prepare for FCA supervisory work looking at how they are complying with their obligations to provide independent oversight.

The Travers Smith view

It is possible to detect some underlying issues and concerns in the broader themes of the Report which may influence the regulator's supervision and policy development in the coming year. In our view, these include:

Increasing apprehension over private credit markets: The recent high-profile bankruptcies of businesses such as First Brands Group and Tricolor Holdings have led to widespread press coverage about potential stresses in private credit and the wider potential impact on the UK financial system and the broader markets. There are multiple points of emphasis in the Report about the need for firms to be prepared for market volatility and stress, as well as the importance of robust, transparent valuation processes in the face of changing conditions. The FCA also emphasises its involvement in the System-Wide Exploratory Scenario (SWES) exercise being carried out by the Bank of England, which this year has a focus on interaction with private markets, and in the international Financial Stability Board's "deep-dive" on private credit. There is also an overt statement that the FCA will be undertaking more focused work on firms' approaches to risk management in private markets. Whether or not regulatory concerns in this area are justified, we anticipate that concerns about the potential impact of stress events in private credit markets may influence both the focus of day-to-day FCA supervision and the development of policy in areas such as fund regulatory reporting proposals and the treatment of leverage under the forthcoming UK AIFMD Review.
Continuing focus on private markets more generally: The last 18 to 24 months have already seen significantly increased interest by the FCA in private market firms, as evidenced by the Private Markets Valuation Review and the recent work on conflicts of interest. There is no indication in the Report that this will be abating any time soon; on the contrary, the FCA indicates that it will continue engaging with the sector with a view to ensuring that the output of previous reviews has been embedded and that firms are taking appropriate actions to deliver good investor outcomes and to ensure broader market integrity. It also appears that further questionnaires or similar data collection exercises are likely, with the associated cost in terms of management time and internal resources for firms which are selected to participate in these exercises. In keeping with the UK government's priorities for economic growth and investment in UK businesses, the FCA does explicitly acknowledge the importance of private markets to the UK financial system. However, it also implicitly appears to suggest that it views itself as treading a delicate path between encouraging wider retail participation in these markets and ensuring appropriate investor protection and awareness, with an explicit reference to increasing supervisory engagement with private markets firms that operate retail distribution arrangements. Key tests of how the FCA views the resolution of these potential tensions will be the forthcoming proposals under the UK AIFMD Review, the final rules on changes to the UK client categorisation framework, and the FCA's anticipated guidance on how the Consumer Duty should apply to firms that are predominantly active in the wholesale markets.
Increasing concerns about operational resilience and cyber security: Again, this is not a new concern and has been a focus on the UK's financial services regulators for a number of years now. Nonetheless, the Report makes multiple references to the importance of firms operating robust systems in the face of increasing concerns about the resilience of the UK financial services sector, particularly in the context of increasingly sophisticated cyber attacks. As the FCA has just finalised its latest operational incident and third party reporting rules in March 2026, we expect that regulatory interest in how firms manage these risks and ensure that they can avoid extended operational disruptions will remain high throughout the coming year and beyond.
Opportunities and threats relating to remuneration and prudential frameworks: Tucked away in the "Other areas of focus" section of the Report are references to reform of the remuneration rules for UK asset managers and the prudential requirements to which they are subject. This looks to be something of a mixed bag. On the one hand, although the FCA does not give any indication of precisely what it is proposing to do in the remuneration space, there is widespread anticipation that it will ultimately have to introduce more proportionate and flexible rules in light of the changes made to remuneration rules for UK banks in the last few years. The key question will be precisely how far the FCA is willing to go in this space, given calls from the industry to consider extensive de-regulation in favour of reliance on a principles-based framework. On the other hand, there are more ominous signs in the prudential field. The FCA indicates that there will be a forthcoming discussion with the industry on prudential requirements for AIFMs, and that it will also be undertaking a post-implementation review of the Investment Firms Prudential Regime (IFPR). However, in the context of IFPR at least, the Report talks about alignment with COREPRU, a rulebook introduced as part of the FCA's cryptoasset proposals which seems destined to become a cross-cutting rulebook for all solo-regulated firms. The risk of ending up with (effectively) an extension of large chunks of IFPR across the asset management sector therefore seems to be increasing.

Timeline of forthcoming publications and initiatives

In the Report, the FCA has also confirmed the approximate timing for the publication of a range of forthcoming initiatives, which we have summarised in the timeline below.

Further information

If you would like to discuss any of the information above or how it may impact your organisation, please get in touch with your usual Travers Smith contact or any of the individuals named below.

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