- within Government and Public Sector topic(s)
And so we come to the end of another long, hot summer. While many people will have spent the last few months enjoying food and drink at picnics and barbecues, legislators and financial services regulators have also been busy serving up their own latest creations, not all of which promise to be universally palatable. Although some of these offerings may be peppered with this season's trendy new ingredient, pragmatism, others may appear to be either a little over-done or still somewhat half-baked. Still, whether you prefer British cuisine or a more continental flavour, there's no shortage of dishes on offer. Before the dark evenings and cold weather return, it seems an opportune moment for firms to start stocking up for the winter, although we can't promise that everything will be easy to digest. Nonetheless, even if the spread looks somewhat daunting, now is definitely not the time to be shy at the regulatory buffet – there will surely be a steady diet of developments to see us all into 2026.
In this End of Summer Postcard, we set out a taster of key issues that may need some attention during the remainder of 2025, along with high-level action points for financial services firms to consider.
1. UK Economic Crime and Corporate Transparency Act 2023 (ECCTA)
Key action points for Q4 2025
- Undertakings which are "large organisations" (or which are subsidiaries of a large organisation) should review their implementation of their fraud prevention frameworks, following the entry into force of the new ECCTA failure to prevent fraud offence on 1 September 2025
- UK companies should ensure that individuals who are directors or persons with significant control complete identity verification as soon as possible, given the entry into force of the verification requirements on 18 November 2025 (subject to transitional arrangements)
- Given the anticipated application of the regime to LLPs on or around the same date, LLP members should also complete identity verification as soon as possible
- UK LLPs should continue to monitor for further Companies House announcements in relation to IDV being turned on for those entities. There are also expected to be announcements of the IDV go-live dates for corporate directors, corporate LLP members, officers of corporate PSCs and individuals who wish to file documents on behalf of a UK company or LLP (e.g. a company secretary)
While the evenings might be getting darker with the arrival of autumn, ECCTA is intended to shine a new light on the ownership of UK undertakings with the introduction of its new identity verification requirements. In addition, businesses are increasingly expected to put their own internal procedures for fraud prevention under the spotlight as the new UK criminal offence of failure to prevent fraud enters into force.
ECCTA failure to prevent fraud offence
ECCTA introduced a new criminal offence of failure to prevent fraud (FTPF), which came into force on 1 September 2025. If you would like a refresher on the key elements of the FTPF offence, including its scope and territorial reach, please refer to our recent briefing and our earlier November 2024 briefing.
Many firms will already have completed their scoping analyses to determine if they or their affiliates are "large organisations" as defined under ECCTA, and therefore may potentially commit the offence.
However, if firms have not already done so, they should complete this workstream as a priority, given that the FTPF offence is now in effect.
By way of a brief reminder, a "large organisation" is a body corporate or partnership that meets at least two of the following criteria in the preceding financial year:
- more than £36 million in turnover;
- more than £18 million in total assets; or
- an average of more than 250 employees.
Where an entity is a parent entity, the above tests apply on a group basis (i.e. the position of the parent is aggregated with its subsidiaries, and the net position is assessed). The gross aggregate position must also be assessed for turnover (£43.2 million gross) and the balance sheet position (£21.6 million gross), and therefore a parent entity may be in scope where the aggregate position exceeds at least two of the net or gross thresholds. Where a subsidiary is not a large organisation in its own right, but is a subsidiary of a parent entity which does qualify as a large organisation, the subsidiary is subject to a more limited version of the FTPF offence.
Many firms that are within scope of the FTPF offence will have spent H1 2025 carrying out implementation actions, which are likely to have included:
- agreeing a sensible and proportionate scoping analysis;
- completing fraud risk assessments across their organisations;
- reviewing relevant policies and procedures in relation to financial crime and fraud prevention;
- carrying out an exercise to identify any third party "associates" (i.e. other entities or persons who perform services for or on behalf of an in-scope organisation) in relation to which the firm will need to take reasonable steps to prevent fraud;
- reviewing whether any further due diligence measures are required in connection with suppliers, M&A activity or the ongoing operations of any inscope portfolio companies;
- providing appropriate staff training to ensure that senior management are aware of the FTPF requirements and that other staff understand the organisation's approach to fraud prevention;
- updating template contractual documentation in relation to suppliers or investment activities to incorporate any required additional fraud prevention elements; and
- putting in place an appropriate review framework to monitor the potential risk of fraud and the effectiveness of the organisation's prevention measures on an ongoing basis.
However, if FTPF implementation remains on your organisation's to-do list, this is an area that may need attention sooner rather than later, given the potential for an unlimited fine if an organisation is found to have failed to take reasonable steps to prevent fraud by its employees, agents, subsidiaries or other associates.
Travers Smith has advised a range of clients on FTPF issues and can provide a template pack to kick-start your implementation project if this never quite made it to the top of your organisation's in-tray during the year to date.
ECCTA identity verification requirements
In addition to the FTPF requirements, ECCTA has also introduced a new identity verification (IDV) regime in relation to individuals who are connected to UK companies, limited liability partnerships (LLPs) or (in the longer term) limited partnerships. When fully implemented, this framework is expected to have imposed IDV obligations on millions of individuals and therefore it represents a significant undertaking for the UK companies registry, Companies House. For more information on the background to, and scope of, the ECCTA IDV regime, please refer to our June 2024 briefing on this topic.
Perhaps because of the daunting scale of the task, to date, the roll-out of the IDV requirements has been somewhat more piecemeal and haphazard than the industry might have hoped. Nonetheless, the mists are now beginning to clear, with Companies House having recently confirmed that the first wave of IDV requirements will begin to apply from 18 November 2025.
The first wave of requirements will affect individuals who are directors or persons with significant control (PSCs) of UK companies, but the impact will differ as between those two groups.
For company directors:
- From 18 November 2025, any individual who is being appointed as a new director of a UK company (whether the company already exists or is newly incorporated) must have completed IDV before being appointed.
- Where an individual was an existing director of a UK company on 18 November 2025, the director will have until the company next files its annual confirmation statement at Companies House to complete IDV. The confirmation statement dates for a company are shown on its Companies House register page. For companies with confirmation statement due dates that fall shortly after 18 November 2025, this will mean that they may have very little time to ensure that their directors have completed IDV.
For PSCs:
- Every individual who is newly registered as a PSC with Companies House on or after 18 November 2025 must complete IDV and provide a statement confirming their personal IDV code within 14 days of being registered.
- For individuals who are already registered as PSCs on
18 November 2025, the position depends on whether the
individual is also a director of the same company, as follows:
- if the PSC is also a director of the company, the individual must provide an IDV code to Companies House within 14 days of the company's annual confirmation statement; or
- if the PSC is not also a director of the company, the individual must provide an IDV code to Companies House within 14 days of the first day of their month of birth. For example, if the individual is born on 12 March 1990, the individual would have until 15 March 2026 (i.e. 14 days from 1 March) to provide an IDV code to Companies House.
Companies House has also confirmed that from 18 November 2025, directors and PSCs will be able to check the Companies House register pages for the companies with which they are affiliated to confirm the IDV due dates for each role they hold.
The latest announcement from Companies House has not yet confirmed the IDV timetable for LLP members or individuals who are PSCs of LLPs, but we currently expect that equivalent IDV obligations may apply to them from the same date (i.e. 18 November 2025).
The IDV requirements for corporate directors or corporate LLP members, officers of corporate PSCs, and individuals who wish to file documents at Companies House on behalf of a company or LLP (e.g. corporate secretaries) will commence at a later date.
As a reminder, directors and PSCs who fail to verify their identities when required will commit a criminal offence. A company which allows a director to continue in their role without having completed IDV will also commit an offence, as will every officer of that company. In each case, the offence may be punished by a potentially unlimited fine. Equivalent offences will apply in relation to LLPs and their members.
Individuals can complete IDV directly via the Companies House website (although in certain cases, this is not always possible). Alternatively, they may use a third- party authorised corporate service provider (ACSP) to complete the process. Generally speaking, an individual should only need to complete IDV once to obtain an identification code that they can use in relation to all roles for which IDV is required.
Given the potential penalties for failure to comply with the IDV regime, as well as the anticipated high demand on Companies House's infrastructure and the services of ACSPs in the run-up to the go-live date, affected individuals should consider completing IDV as soon as possible.
2. UK FCA Conflicts of Interest Review for UK Private Market Firms
Key action points beginning in Q4 2025
- UK private market firms should review the FCA's feedback on its Private Markets Valuation Review and ensure that the identified "actions for firms" and "good practice" points have been considered
- UK private market firms should consider taking stock and/or reviewing their conflicts of interest arrangements in anticipation of the FCA's planned further review in this area during Q4 2025 and Q1 2026. This should include the identification and recording of conflicts in registers or conflicts maps, the policies and procedures used to manage conflicts, and the governance and oversight of conflicts-related issues
Regulatory concern about conflicts of interest is nothing new. Principle 8 of the FCA's pervasive Principles for Businesses has long imposed a broadly phrased requirement on UK firms to ensure that conflicts of interest are managed fairly, and there are numerous examples of FCA fines for conflicts-related failures. However, 2025 has seen a renewed focus by the regulator on this area, in particular in relation to the business models and governance structures of private market firms.
The FCA's work on its Private Markets Valuation Review (PMVR) during 2024 and the subsequent publication of its PMVR feedback in Q1 2025 (as summarised in our March 2025 briefing) was the opening salvo in this area, but is certainly not the end of the story. The FCA has continued to engage with individual firms on the PMVR findings over the last few months, which has resulted in some firms making adjustments to their existing governance arrangements or reviewing and rearticulating why existing arrangements are sufficient to address potential valuations-based conflicts. For those UK private market firms who have yet to work through the FCA's feedback (including its specific action points and identified good practices), this should be high on the priority list for Q4 2025, given the FCA's forthcoming wider conflicts review. We have an impact assessment which analyses the FCA's output for private market firms who would find this helpful.
Speaking of the wider review, the FCA is expected to launch its broader examination of conflicts of interest in UK private market firms imminently, with work continuing during Q4 2025 and Q1 2026. Although the exact scope of this latest review has not yet been published, it seems likely that the regulator will be looking to see how asset managers and advisers in the sector have identified and recorded the potential conflicts of interest that are relevant to their activities, the procedures that they have in place to manage those conflicts, and how they ensure effective oversight and governance of their conflicts frameworks. Where firms have not yet acted upon the PMVR's findings in relation to valuation-based conflicts, there is a risk that this may be identified by the FCA when it is conducting its more holistic conflicts review.
The methodology that the FCA will adopt for the broader conflicts review has also not yet been confirmed. However, we expect this to follow a similar pattern to the PMVR, involving two phases: the first phase would involve information gathering from private market firms through questionnaires or data requests, and the second phase would involve targeted "deeper dives" with specific firms to drill into the detail of policies and control frameworks.
With the conflicts review on the horizon, now would be a good time for firms to review their conflicts maps/registers, their policies and procedures for identifying and managing conflicts, and the related governance and oversight arrangements they have in place.
3. EU AIFMD II
Key action points beginning in Q4 2025
- AIFMs should consider what changes are needed to their operations to reflect the new requirements under AIFMD II. Firms should keep an eye out for further implementing rules and guidance from the EU regulators
- AIFMs managing AIFs which originate loans should consider carefully what changes are needed to their existing and planned loans in light of the new loan origination requirements. Some of these requirements will not come into force fully until 2029 but, even so, firms may need to start planning now to ensure that they are in a position to comply from that date
- AIFMs managing open-ended AIFs should consider whether any existing liquidity management tools meet the AIFMD II criteria and may need to adopt new tools or make changes to existing tools
- AIFMs should also consider the impact of the new disclosure and reporting requirements and whether changes need to be made to existing processes to collect any additional information required
- Some repapering may be required – particularly for delegation arrangements
The EU's original Alternative Investment Fund Managers Directive (AIFMD) has now been in force for over a decade. Like many EU financial services regimes, AIFMD included a requirement for the European Commission to review the operation of the AIFMD, which in turn resulted in the initial AIFMD II proposals being published in 2021 and finalised in early 2024. For further background on AIFMD II, please refer to our 2023 introductory briefing on the subject.
The AIFMD II changes will start to apply from 16 April 2026 and will affect EU full-scope AIFMs, with some of the changes also being relevant for non-EU AIFMs marketing into the EU under national private placement regimes. However, the greatest impact will be felt by AIFMs managing AIFs which originate loans or which are open-ended.
Key changes under AIFMD II will include:
- New requirements for AIFs which originate loans, including concentration limits, prohibitions on certain types of loans and risk retention requirements. Additional requirements apply in respect of AIFs originating loans on a material basis including leverage limits and a requirement to be closed-ended. Some grandfathering provisions also apply.
- New rules on liquidity management for open-ended AIFs, including requirements for two liquidity management tools (LMT) selected from a specified list and policies and procedures for their use.
- Enhanced disclosure and reporting requirements, including enhanced Annex IV reporting obligations and new investor disclosure requirements.
- A requirement for the performance of delegated functions to comply with AIFMD irrespective of the delegate's location or regulatory status.
The EU regulators are currently working on the implementing measures which provide more detail on these changes. Key publications which have been issued so far include:
- Final Report on the Draft RTS on Liquidity Management Tools and Final Report on the Guidelines on Liquidity Management Tools which set out details on the use and characteristics of LMTs.
- Consultation on draft Regulatory Technical Standards on open-ended Loan Originating AIFs which sets out requirements for a loan-originating AIF to be open-ended. The consultation is now closed with a final report expected later this year.
Please also see our 2025 New Year Briefing for more information on the above areas. There may also be some further changes to EU AIFMD as a result of the EU Retail Investment Strategy, but the status of this initiative is currently unclear.
Although the changes will not be relevant for UK AIFMs (unless they are marketing into the EU), the UK is also proposing a number of changes to the UK AIFMD regime. Unlike the changes being introduced by the EU under AIFMD II, these are largely aimed at simplifying the regime and removing some rules which do not work well. If these are adopted, we can therefore expect even more divergence between the EU and UK AIFMD regimes. We discussed these proposals in more detail in an update in April 2025.
If your organisation would like assistance with AIFMD II in the run up to the April 2026 start date, Travers Smith has prepared a range of materials which are designed to support an AIFMD II implementation project. Please get in touch with your usual Travers Smith contact or any of the individuals named at the end of this briefing to discuss how we can help.
4. UK FCA Review of Off-Channel Communications
Key action points for Q4 2025
- Firms within scope of the FCA's rules on recording of telephone conversations and electronic communications should consider their policies on off-channel communications and whether these remain appropriate in light of the FCA's findings
- Particular areas to review include whether there is sufficient management information and effective monitoring (including analysis of output)
- Firms should also consider the extent to which staff comply with their policies in practice and whether further staff training or amendments to the policies are required
It should come as no surprise that telephone recordings and copies of electronic communications are one of the richest sources of information about potential misconduct within UK financial services firms, as well as an important source of evidence in disputes with clients. As a result, the FCA places a high degree of importance on firms' compliance with the so-called "telephone taping" rules (although this label is something of a misnomer, extending beyond the recording of telephone conversations to capture other electronic communications). For firms which are part of groups headquartered in the United States, we understand that expectations of the US Securities and Exchange Commission (SEC) are likely to set the requirements at a higher bar.
Hot on the heels of a wave of enforcement actions by the SEC against US firms for failure to maintain and preserve electronic communications, the FCA recently published its own findings on how UK firms approach communications made by employees outside the firms' official monitored, recorded channels (also known as "off-channel communications").
This follows a multi-firm review of wholesale banks, but the findings will be relevant to all firms which are required under the FCA rules in SYSC 10A to record and monitor communications. This includes MiFID investment firms and fund managers - although for fund managers, this is largely restricted to communications relating to listed investments.
The FCA found that all firms could improve their approach to off-channel communications, but that some firms' practices were better than others. It also pointed out that a low number of breaches could simply mean that a firm has ineffective detection systems (and vice versa), and that firms' focus should be on improving behaviour and not just detecting breaches.
The FCA's report does not explicitly set out a list of good and bad practices, but it does highlight some approaches that it has identified (and presumably approves of). These include:
- Updating policy terminology to include new technologies like smart watches.
- Prohibiting personal numbers in out-of-office replies and directories.
- Providing dedicated corporate devices to clientfacing staff to reinforce the separation of workrelated and personal activities.
- Detailed management information on breaches and monitoring.
The FCA also provides some commentary on firms' telephone recording policies. This includes that firms which operate single, global policies should make sure that those policies meet UK standards and are followed in practice. Also, repeated breaches of a firm's own internal policy (even for parts of the business not covered by the recording requirements, such as nonregulated activities) may be scrutinised by the FCA. This is particularly likely if it involves a senior leader or reflects an increasing trend.
The FCA is not planning to update its rules to address every potential scenario for monitoring communications but it will continue its discussions with firms. It has also set out some questions that firms should consider:
- Do employees fully understand their responsibility to record all relevant communications?
- Do leaders set a strong tone from the top and encourage a speak-up culture?
- Are there any unreasonable barriers preventing staff from following the policies effectively?
- Are third-party vendors effectively monitored?
- Does the firm's surveillance model align with its business model?
- Where a global framework is in place, do UK senior managers have sufficient oversight of how it operates?
- Is there sufficient management information to assess compliance and monitoring?
- Do senior managers address any breaches promptly?
In light of the FCA's stated intention to continue discussions with firms in this area, firms may wish to review their policies and how these operate in practice in the near future to ensure that they are aligned with the FCA's rules and expectations.
5. Changes to the UK Money Laundering Requirements
Key action points beginning in Q4 2025
- Firms should ensure that their approach to politically exposed persons reflects the FCA's updated guidance. This is likely to require changes to policies and procedures
- Firms should also consider the impact of HM Treasury's proposed changes to the Money Laundering Regulations on their businesses and whether they wish to respond (either directly or through industry associations) to the consultation on the draft legislative amendments, which closes on 30 September 2025
- Firms should monitor for any consultations on updates to guidance published by the Joint Money Laundering Steering Group or other relevant bodies
If firms are in any doubt as to the importance that the FCA places on anti-money laundering and terrorist financing controls within firms, they need only consult the FCA's list of enforcement actions for 2025. In the calendar year to date, the FCA has fined at least five firms for breaches in this area, with total cumulative penalties exceeding £65 million. As a result, firms would be well-advised to keep an eye on the continuing evolution of UK money laundering requirements, even if some of the recent changes in this area may be largely de-regulatory in nature. We've set out some information below on two recent sets of changes to the rules on this topic.
Updated guidance on the treatment of PEPs
The first change relates to the FCA's updated guidance on the treatment of politically exposed persons (PEPs): FG25/3: The treatment of politically exposed persons for anti-money laundering purposes.
Most of the changes are intended to reflect the new requirement that, as a starting point, a UK PEP should be treated as being lower risk than a non-UK PEP. These include that:
- This approach should also be adopted in overseas subsidiaries and branches unless not permitted by local law.
- A person who is both a UK PEP and a non-UK PEP should be treated as a non-UK PEP.
Firms which take a more cautious approach than under the UK Money Laundering Regulations 2017 (MLRs) and the FCA's guidance will now need to record their reasoning in a number of cases.
There are also some other changes which are mostly intended to make things easier for firms, including:
- Senior management (and not just the MLRO) will be able to sign off decisions to enter into a business relationship with a PEP.
- A legal entity with a beneficial owner who is a PEP should only itself be treated as a PEP if the beneficial owner exercises significant control.
Changes to the UK Money Laundering Regulations
The second development is HM Treasury's response in July 2025 to its original consultation on changes to the MLRs. This includes some (for the most part, relatively minor) clarificatory changes to the UK money laundering regime. However, despite industry hopes during the consultation phase, HM Treasury does not seem to have taken on board suggestions for a broader review of the MLRs. We discussed the proposed changes and their impact in more detail in our recent July 2025 briefing.
On 2 September 2025, HM Treasury published draft legislation amending the MLRs and an accompanying policy note as part of a technical consultation with a feedback deadline of 30 September 2025. These documents are designed to translate the policy positions in the initial July 2025 response above into the required legislative changes, and the consultation is seeking feedback on the clarity of the legislative drafting (rather than the substantive policy decisions).
Key areas which will be relevant to financial services firms include:
- Clarification that enhanced due diligence will only be automatically required in relation to countries on the Financial Action Task Force (FATF) Call for Action list (currently North Korea, Iran and Myanmar) and not the other high risk third countries on the FATF Increased Monitoring List. However, the fact that a jurisdiction is on the Increased Monitoring List will still be a relevant factor to take into account when determining whether the overall risk in a given situation points towards a requirement to apply enhanced due diligence.
- Amendment of one of the triggers for enhanced due diligence so that it applies to "unusually complex" transactions instead of all complex transactions. This is designed to avoid firms needing to apply enhanced due diligence in circumstances where a transaction may be objectively complex (for example, an M&A transaction), but the transaction is consistent with the expected activity of the customer and does not otherwise present any concerns that there is a material risk of money laundering.
- Restatement of relevant monetary thresholds into values in sterling (rather than the existing euro values).
In several other areas, HM Treasury determined in July 2025 that amendments to the text of the MLRs are not required, but has indicated that it will ask supervisors and industry bodies to publish updated guidance to clarify how firms should apply various obligations. This includes, for example, potential clarifications on when a "business relationship" is considered to be established or when firms are required to carry out a source of funds check. In practice, it seems likely that this will result in some updates to the existing Joint Money Laundering Steering Group guidance.
Firms should keep a watching brief over any potential consultations on updated industry or sectoral guidance in this area during Q4 2025. HM Treasury states that it expects to lay the finalised legislative amendments to the MLRs before Parliament in early 2026.
6. FCA Consumer Composite Investments Regime
Key action points beginning in Q4 2025
- Firms should consider which of their products are likely to be in the scope of the new regime
- Once the FCA's final rules are published, firms should consider their approach to complying with the new rules. This may include new processes to produce or collect the mandatory information and new arrangements between distributors and manufacturers to ensure that information is properly shared
- Unauthorised firms will also need to ensure that they have processes to comply with new requirements that will apply to them (such as product governance and complaints handing procedures for manufacturers)
- Firms will also need to consider what additional, non-mandatory information should be disclosed to retail investors under the FCA's new rules (once published) and how this should be presented
- Firms (both authorised and unauthorised) will need to ensure that they are lawfully able to make financial promotions in respect of CCI products – this may require the promotions to be approved by an FCA-authorised firm and may also prevent certain unauthorised fund promotions being made to certain types of recipients
In the last few years, a continuing source of frustration for UK firms whose investment distribution arrangements involve retail customers has been the Packaged Retail Investment and Insurance-based Products (PRIIPs) framework, which was onshored into UK law when Brexit occurred. In particular, firms have raised concerns that the PRIIPs rules are overly prescriptive and inflexible, and that certain required disclosures do not accurately reflect the risks or costs associated with particular investment products. While firms will still need to wait to see the outcome of the EU's Retail Investment Strategy proposals for updates to the EU version of the PRIIPs framework, the UK is forging ahead with a replacement to the PRIIPs rules, which is now beginning to take shape.
The forthcoming Consumer Composite Investments regime sets out the new UK disclosure rules for retail products. It will apply to the new UK concept of a Consumer Composite Investment (CCI), which is heavily based on the concept of PRIIPs. The CCI regime will replace the current PRIIPs KID regime in the UK and will cover UCITS and non-UCITS retail schemes, as well as investment trusts and certain derivatives, structured products and other complex financial instruments distributed to UK retail investors.
The new regime is expected to come fully into force at some point during 2027 following an 18-month transition period. The FCA is due to issue its final policy statement with rules later this year, following two consultations: CP24/30: A new product information framework for Consumer Composite Investments and CP25/9: Further proposals on product information for Consumer Composite Investments.
The new regime includes rules for manufacturers and distributors of CCIs – which potentially includes both UK authorised and unauthorised persons, as well as non-UK firms manufacturing or distributing CCI products to UK retail investors.
Unlike current retail disclosure regimes, the CCI regime is intended to be less prescriptive and more flexible, with greater discretion given to firms as to how they present the information. However, there will still be significant mandatory disclosures that will need to be included in customer-facing documents. Some of these are quite extensive and detailed, and therefore firms may find that they will not have quite as much latitude as they might have hoped. For example, the FCA has proposed that firms provide detailed information on cost and charges and historic performance, and that they should use risk indicators which would be on a more granular scale than is currently the case for PRIIPs (based on a ten-point scale rather than a seven-point scale as at present).
There is no exemption in the financial promotion regime for the CCI product summary or related documentation. It is therefore expected that many promotions in respect of CCIs will need to be treated as promotions which are subject to the UK financial promotion or promotion of collective investment schemes restrictions. This may mean that the promotions would need to be approved by an FCAauthorised firm and/or in some cases (particularly for CCIs which are unauthorised funds) can only be made on a very restricted basis.
Firms should continue to monitor for the final FCA rules in this area during Q4 2025 to ensure that they identify any relevant changes with plenty of time to implement any updated disclosure or distribution arrangements during the expected transitional period.
7 Changes to the UK Walker Guidelines
Key action points beginning in Q4 2025
- Private equity firms with portfolio companies in scope of the UK Walker Guidelines should ensure that they have reviewed and implemented the revised version of the Guidelines
- In-scope firms should identify which of their portfolio companies fall within scope of the Guidelines on the basis of the revised application thresholds
- In-scope firms should also engage with inscope portfolio companies to ensure that they are aware of any additional or revised content that they will need to include in annual reports
- In-scope firms should also review the public disclosures that they make about the private equity firm itself to ensure that these are compliant with the Guidelines
The Walker Guidelines are a set of UK disclosure standards that are designed to provide increased transparency in relation to the activities of UK private equity-backed companies and the private equity firms that oversee those investments. Compliance with the Guidelines is monitored by the Private Equity Reporting Group (PERG).
Firms that are members of the British Private Equity and Venture Capital Association (BVCA) are required to comply with the Guidelines by virtue of their BVCA membership. Although the Guidelines are voluntary for other firms, where a firm has portfolio companies that are within scope of the Guidelines and it does not comply with them, it may be "named and shamed" by PERG in its annual monitoring reports.
In July 2024, PERG and the BVCA published a consultation to update the Guidelines, with the results of that consultation being published in December 2024. We published a briefing on the updates to the Walker Guidelines at that time.
Broadly speaking, changes introduced by the update to the Guidelines include:
- changes to the scope of the private equity firms caught by the Guidelines, clarifying that they will only be caught where they operate strategies that are designed to acquire controlling stakes in companies (rather than control being acquired incidentally through some other event, such as a debt for equity swap on a restructuring);
- amendments to the criteria used to determine which portfolio
companies will fall within scope of the Guidelines. A company will
now be within scope where:
- it has an enterprise value of £500 million at the time of the acquisition; and
- it has either:
- more than £200m of revenue, at least 50% of which is generated in the UK; or
- more than 1,000 full-time equivalent employees in the UK; and
- updated disclosure requirements for in-scope portfolio companies in relation to principal risks and uncertainties, environmental issues, and diversity, equity and inclusion.
PERG has stated that it will report on compliance of portfolio companies with the updated Guidelines in December 2026. This will cover portfolio companies which fall into scope between 1 January 2025 and 31 December 2025, provided that the portfolio company meets the threshold criteria on 31 December 2025. The report will review the annual reports of in-scope portfolio companies with accounting years ending up to and including 30 April 2026.
Given the time that it can take to prepare disclosures for company annual or interim reports and to collate any necessary data for disclosures at the level of the private equity firm itself, firms seeking to comply with the Guidelines should consider engaging with portfolio companies and internal stakeholders as soon as possible to ensure that they will be well-positioned to meet the updated requirements. Firms that have been applying the Guidelines in previous years may also wish to carry out an updated scoping exercise on their portfolio company population, given the changes to the scoping criteria identified above.
8 Updated UK Stewardship Code
Key action points for Q4 2025
- Firms that are signatories to the Stewardship Code should begin preparing to report against the updated requirements of the 2026 Code for reporting periods falling on or after 1 January 2026
- They should also monitor for the outcome of the FRC's consultation on guidance on the 2026 Code as this may assist with the preparation of disclosures
Back in June 2025, the UK Financial Reporting Council (FRC) published an updated version of the UK Stewardship Code (replacing the earlier 2020 version of the Code), following a consultation originally launched in November 2024. As the revised code will apply for reporting periods on or after 1 January 2026, the FRC refers to it as the "2026 Code". If you would like to read in more detail about the changes contained in the 2026 Code, please read our June 2025 briefing.
Very broadly, the 2026 Code is intended to reorientate reporting towards key principles of effective stewardship and away from formalistic "tick-box" disclosures. This has involved a restructuring of the content to contain fewer principles, with certain requirements moved into disclosure obligations instead. The aim is to allow firms to disclose more accurate information about how they operate, rather than requiring them to fit certain disclosures around adherence to specific stewardship principles. The FRC anticipates that the restructured 2026 Code will result in a material reduction in the reporting burden for participating firms.
The 2026 Code is divided into two parts:
- a Policy and Context Disclosure, which must be reported to the FRC every 4 years, or when there has been a material change to the firm's organisation which means that the last Policy and Context Disclosure no longer aligns with the Activities and Outcomes Report (see below); and
- an Activities and Outcomes Report, which must be submitted to the FRC every year.
The FRC's consultation on updated guidance to accompany the 2026 Code closed on 31 August 2025. While use of the guidance is optional, firms that are signatories to the Code may nonetheless find it helpful to refer to it when preparing any required disclosures.
Although adherence to the Stewardship Code is voluntary, under the FCA's rules, UK firms which manage investments for institutional professional clients, and certain fund managers marketing sustainable products, are generally required to disclose whether they have made a commitment to the Code. In light of the substantial revisions made to the 2026 Code, some firms may wish to consider whether to become signatories in the future.
Firms that have signed up to the Code will need to review the updated requirements of the 2026 Code and ensure that they are preparing any reports for periods from 1 January 2026 in accordance with the revised standards.
9. UK FCA multi-firm review on climate reporting by asset managers
Key action points beginning in Q4 2025
- If they have not already done so, UK asset managers should consider whether it is possible and desirable to align TCFD and SDR reporting periods to improve reporting efficiency
- Where a firm is required to publish productlevel TCFD reports, it should ensure that these can be easily located and accessed on the firm's website
- Firms should check that the scenario analysis in any product-level TCFD report includes all three of the FCA's mandated climate change scenarios
Sustainability-related periodic reporting requirements remain a significant area of focus and complexity for asset management firms. The UK framework for asset managers has two key components: reporting derived from the Taskforce on Climate-related Financial Disclosures (TCFD) Recommendations and reporting under the FCA's separate Sustainability Disclosure and Labelling Regime (SDR). In case it would be helpful to have a reminder, we have included a table in the appendix to this End of Summer Postcard which includes a high-level summary of the application of the UK TCFD and SDR periodic reporting requirements in relation to asset managers.
On 6 August 2025, the FCA published the results of a multi-firm review it had conducted on climate reporting by asset managers, life insurers and FCA-regulated pension providers under the UK rules. In particular, the FCA focused on firms' reporting under the TCFD recommendations, as implemented through part of the FCA's Environmental, Social and Governance (ESG) sourcebook.
Many of the FCA's observations in the review feedback relate to TCFD product-level reports. Where asset managers carry out fund management activities outside the UK and appoint a UK firm as a delegated portfolio manager, no TCFD product report is normally required. As a result, while the TCFD product report-related findings will be relevant to UK fund managers, groups which operate structures where portfolio management is delegated to the UK (or where a UK entity is providing ongoing or recurring investment advice to a non-UK manager in relation to private market activities) will be primarily focused on the entity-level reporting obligations.
Issues identified by the FCA in the multi-firm review of TCFD reports include:
- TCFD product reports being difficult to locate on firms' websites, which the FCA considers may be contributing to low level of retail investor engagement with product-level information. The FCA emphasises that its rules require that reports are published in a way which it makes it easy for prospective readers to locate and access them.
- Firms struggling to provide quantitative data in relation to forward-looking disclosures (e.g. scenario analyses).
- Approximately half of the product-level TCFD reports reviewed by the FCA failing to include all three of the climate scenarios (i.e. orderly transition, disorderly transition and hothouse world) required under the FCA's ESG rules. The FCA reminds firms that all three scenarios must be included within a report's scenario analysis.
While the FCA found that TCFD reporting was resulting in greater transparency for clients and that firms have been increasing their capabilities to build climaterelated risks into their investment strategies, it also noted a range of concerns raised by firms:
- Some firms considered that the information contained in TCFD reports was too complex for retail investors to understand.
- Asset managers stated that the UK's overlapping sustainability disclosure regimes were inefficient and that the TCFD requirements were too granular.
- Firms sought further clarity on the future of the FCA's TCFD-derived rules, given the broader direction of travel towards the use of standards set by the International Sustainability Standards Board (ISSB), as reflected in the proposed UK Sustainability Reporting Standards (SRS).
In response to some of these issues, the FCA stated that it is considering how it can further streamline the current sustainability reporting framework to reduce unnecessary burdens on firms, while also ensuring that clients have useful information to support decision making and that instances of greenwashing are reduced. As a first step in that direction, it has updated its general sustainability reporting requirements webpage to provide further information on how firms can align their reporting periods under the TCFD and SDR frameworks to streamline the reporting process.
10. FCA review of client categorisation rules
Key action points for Q4 2025
- Consider opportunities to engage with the FCA through industry associations to influence the outcome of the FCA's review of the existing UK client classification rules
The complexities of navigating the existing UK rules on the categorisation of clients and investors will be familiar to many firms. The alternative asset management industry, in particular, has consistently highlighted some of the difficulties with the existing framework, especially in relation to the limited basis on which individuals can be opted up to elective professional status in the context of investing in alternative funds. Where individuals are unable to be opted up, this can significantly restrict their ability to participate in certain investment opportunities. While retail client protections may be appropriate for standard consumers, the current rules can also have unduly restrictive effects for investment professionals, experienced investors, or high net worth individuals who have a significant capacity for risk and a desire to diversify their portfolios to improve returns.
It was therefore a welcome development when, on 10 July 2025, the FCA announced on its website that it was planning to review the existing UK rules on client classification, with the aim of ensuring that the framework is proportionate for firms dealing with wealthy or experienced investors. In its announcement, the FCA confirmed that it will therefore be consulting on the elective professional client categorisation rules later in 2025.
The FCA has previously consulted on reforming the client categorisation rules in CP24/24, as part of its review of the post-Brexit UK MiFID framework. To date, the FCA has not yet published the outcome of that consultation and it is unclear how the proposals it contained may interact with the new consultation it is planning to publish later this year. The FCA's recent announcement suggests that the new consultation may be focused primarily on the elective professional definition, whereas the proposals in CP24/24 also discussed other elements of the client categorisation framework, such as potential clarification of the per se professional category.
In light of the potential opportunity to improve and liberalise the existing UK opt-up rules, firms should monitor for any further FCA publications on this topic. They may also wish to engage with their industry associations to highlight any practical difficulties they are experiencing and to explore how those could be resolved through appropriate amendments to the categorisation framework.
11. EU Sustainable Finance Disclosure Regulation
Key action points for Q4 2025
- Firms may wish to review their SFDR disclosures in light of the further guidance provided by the European Supervisory Authorities in their latest updated Q&As
The EU's Sustainable Finance Disclosure Regulation (SFDR) has applied for over four years, but continues to throw up difficult interpretative questions for EU financial market participants and non-EU fund managers seeking to market their funds into the EU.
As we wait in anticipation of what SFDR 2.0 might bring (with an expectation that final proposals will be published before the end of 2025), the European Supervisory Authorities (ESAs) continue to refine the existing SFDR framework by publishing Q&As and other guidance. In that regard, the latest update to the consolidated SFDR Q&As in August 2025 contained a couple of responses which might be of interest to firms when preparing SFDR disclosures.
First, the ESAs have clarified how the disclosure of minimum percentages of sustainable investments should operate in practice. Where firms are offering financial products under either article 8 or article 9 SFDR, they may publish minimum percentages in relation to the subsets of environmentally sustainable investments (X%) and socially sustainable investments (Y%). There had been some uncertainty about whether the total minimum commitment to sustainable investments disclosed by the firm (Z%), must equal the sum of X% and Y%, or whether it can exceed that amount because each of X% and Y% are merely minimum levels of investment. The ESAs have helpfully now confirmed that the latter position is correct – i.e. the overall Z% commitment does not need to equal the sum of X% and Y%, but can be higher. However, in this situation, the ESAs state that it is "best practice" to include an explanation as to why this is the case. This is likely to be a welcome clarification for many firms, confirming a common-sense approach to the interpretation of the interaction between the individual minimum commitments to different types of sustainable investments and the total overall minimum commitment.
Additionally, the ESAs were asked about the calculation methodology for presenting information in the periodic disclosures for financial products in relation to the top investments of the financial product and the proportion of sustainability-related investments. For example, market participants asked whether the disclosures needed to be provided as quarterly or year-end snapshots of the relevant position. The response on this question is considerably less helpful, as the ESAs have concluded that because the periodic product disclosures must be included in different forms of disclosure documents depending on the type of the firm (for example, for an AIFM, they will be in the annual report of the relevant AIF), the ESAs cannot specify a blanket way of calculating the investments information. However, for the time being, this is likely to mean that firms can continue with their existing approaches in this regard, provided that these do not obviously conflict with any requirements in other sectoral legislation which also governs the relevant disclosures.
Our forthcoming UK/EU Alternative Insights webinar series
Now that the summer holidays are over, we're pleased to announce the launch of the next edition of our regulatory webinar series. Each webinar will focus on a different regulatory theme which is topical for the asset management industry and will be presented by relevant experts from across Travers Smith.
Our first three sessions will be:
- AIFMD II: planning your project at 16.00 (UK time) on 24 September 2025
- Non-financial misconduct: a refresher at 16.00 (UK time) on 23 October 2025
- Fund managers' approaches to conflicts and valuation at 16.00 (UK time) on 4 November 2025
We currently expect that later topics within the series will include the following (with dates and times to be confirmed in due course):
- Regulatory issues in asset manager M&A
- Fund tokenisation
- Non-bank intermediation and IOSCO developments
- Securitisation regulation
- Market conduct refresher
- Merger control investigations
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.