Investment Management Update - November 2025

Welcome to the latest edition of our investment management update.

This publication has been tailored to highlight topical news, cases and changes in the law impacting the investment management sector.

UK

• Consolidation review: On 31 October 2025, the FCA published its findings from its consolidation review of firms in the advice and wealth management sector. The FCA focused in particular on the following aspects: the use of debt to finance acquisitions; group risk management; approach to consolidation; acquisition and integration approaches; governance and resourcing and conflicts management. The FCA identifies best practice as including:
  • groups with a clear structure, strong governance and risk management processes as better able to deliver good outcomes for clients;
  • ensuring that regulated entities have sufficient resilience taking into account debt levels in the wider group; and
  • risk analysis on a group-wide basis, taking account of capital and liquidity across all entities.
    
    Multi-firm review of consolidation in the financial advice and wealth management sector | FCA

• Client classifications: On 29 October 2025, the Court of Appeal handed down judgment on Linear Investments Ltd v Financial Ombudsman Service Ltd.
  
  The case concerned an application for judicial review of a decision by the Financial Ombudsman Service (FOS). It was held that the FOS had been entitled to uphold a complaint brought against Linear by a client who had made losses after investing in a high-risk strategy that involved dealing in Contracts for Difference (CFDs). The FOS found Linear breached FCA rules in relation to client opt-up procedures. This was due to failing to undertake an adequate assessment of the client's expertise, experience and knowledge before categorising them as an elective professional client for CFD trading. Linear relied on the client's brief explanation and tick-box answers, even though they provided no evidence of CFD experience. The court found that the FOS was correct in determining that Linear was not entitled to rely solely on the statements (a "tick-box" approach) in the application form, that Linear should have been put on inquiry and that reliance on the form alone was insufficient.
  
  Linear Investments Ltd v Financial Ombudsman Service Ltd [2025] EWCA Civ 1369 (29 October 2025)

• Short selling regime: On 28 October 2025, the FCA published a consultation paper "Changes to the UK Short Selling Regime" setting out proposals to the short selling regime including:
  • introducing anonymised aggregated net short position disclosures;
  • position reporting: to extend the deadline for firms submitting position reports and provide guidance on how firms calculate their positions;
  • providing a definitive list of in-scope shares; and
  • market maker notifications: to streamline and automate FCA systems for receiving position reporting and market maker exemption notifications.
    
    CP25/29: Changes to the UK Short Selling Regime | FCA

• Therese Chambers, executive director of enforcement and market oversight, speech on "Do the right thing": On 20 October 2025, Therese Chambers gave a speech at the City & Financial Global FCA Investigations and Enforcement Summit. The speech followed up on her earlier speech in 2023 reiterating the message that it is more beneficial in the long term to do the right thing. The speech discussed the FCA's approach of conducting fewer investigations but delivering more outcomes. The speech highlighted in particular the FCA's aim to be pragmatic and provided examples of the FCA foregoing fines to allow for greater remediation particularly where firms have cooperated well with the FCA during investigations.
  
  Do the right thing: Part II | FCA

• FCA financial crime survey in corporate finance firms: On 20 October 2025, the FCA published its findings from asurvey on financial crime controls focusing on the over 300 firms that are not required to submit financial crime data regulatory returns. The FCA found that two-thirds of corporate finance firms not required to submit financial crime returns may be falling short of money laundering rules.
  
  Financial crime controls in corporate finance firms: survey findings | FCA

• FCA review of client categorisation in corporate finance firms: On 20 October 2025, the FCA published their findings from a review of firms' compliance with client categorisation rules and certification requirements. The FCA set out good practice and areas of improvement. The FCA is planning to separately update its rules on client categorisation (as previously discussed in CP24/24: The MiFID Organisational Regulation).
  
  Multi-firm review of client categorisation in corporate finance firms: high-level observations | FCA

• FCA response to "Sexism in the city" report: On 16 October 2025, the FCA provided an update to the Treasury Select Committee on its response to the committee's 2024 report following its "Sexism in the City" inquiry. The FCA pointed to its action in extending non-financial misconduct rules to non-banks but noted that it has not yet decided whether to make any additional guidance. The FCA intends to confirm before the end of the year whether or not it will make additional guidance (informed by the feedback to a consultation which closed in September: CP25/18).
  
  FCA letter to the Treasury Select Committee

• FCA capital rule policy statement PS 25/14: On 15 October 2025, the FCA issued a policy statement setting out its final rules to streamline regulatory capital requirements for investment firms. This followed consultation paper "Definition of capital for FCA investment firms" (CP25/10). Under the changes, MIFIDPRU 3 will be replaced in its entirety. However, these changes are not intended to alter capital requirements for UK investment firms or require firms to restructure their balance sheets. Instead, they are intended to make the rules clearer and more proportionate to the business models of FCA-regulated investment firms, and in places will alleviate the administrative burden on firms. The new rules will come into force on 1 April 2026. Please see our article for further information on the FCA's changes.
  
  Red tape slashed by 70% under new capital rules | FCAPS25/14: Definition of capital for FCA investment firms | FCA

• Dual-regulated firms remuneration policy statement: On 15 October 2025, the FCA published a joint policy statement with the Prudential Regulation Authority setting out feedback and the final policy on changes to the remuneration rules for dual-regulated firms.
  
  The FCA is separately due to provide an update by the end of 2025 on its review of the remuneration frameworks for asset managers and investment firms.
  
  PS25/15: Remuneration reform | FCA

• Direct to fund model and fund tokenisation: On 14 October 2025, the FCA published a consultation paper "Progressing Fund Tokenisation" proposing new rules and outlining plans to support the adoption of tokenised funds in the UK. The consultation also introduced a new "direct-to-fund" model for processing dealing in conventional and tokenised authorised funds.
  
  FCA supports tokenisation to boost efficiency and innovation in asset management | FCA
  
  CP25/28: Progressing fund tokenisation | FCA

• T+1 settlement: On 10 October 2025, the FCA published a new webpage on the transition to a T+1 settlement cycle, which will take effect on 11 October 2027. Under T+1, certain trades must be settled just 1 business day after execution. On 23 October 2025, the FCA also published a letter sent to compliance officers of firms in the asset management and alternatives portfolio, setting out these expectations, reminding them of the changes they need to comply with.
  
  T+1 Settlement: time is ticking – why firms should act now | FCA
  
  Dear compliance officer: FCA expectations for UK move to T+1 securities settlement

• The MiFID organisational regulation (MiFID Org): On 9 October 2025, the FCA published a policy statement in relation to moving the requirements in the MiFID Org into the FCA Handbook. These rules came into force on 23 October 2025. The FCA has commented that as it is re-stating existing MiFID Org Reg requirements into its rules with no policy change, firms can continue to follow the MiFID Org Reg requirements as they do currently. However, where firms are updating their internal references in the regular course of business, they may need to reflect the new location of the rules.
  
  Key changes to be aware of are: removing the requirement to report a 10% drop in portfolio value to a retail client from COBS 16A.4.3UK for optional exempt (Article 3) firms, in line with MiFID firms and changing the definition of 'durable medium' so that electronic communications become the default mode of communication with retail clients. Firms would still need to inform retail clients upfront that they can request paper copies.
  
  PS25/13: The MiFID Organisational Regulation

EU

• AIFMD 2: On 21 October 2025, ESMA published a final report and draft Regulatory Technical Standards (RTS) on open-ended loan-originating AIFs. The RTS determines the requirements with which loan-originating AIFs must comply in order to maintain an open-ended structure. The adoption of the RTS by the European Commission has been delayed until 1 October 2027 at the earliest.
  
  ESMA Report: RTS open-ended LO AIFs

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.