Financial Services SpeedRead: 30 April 2025 edition

Welcome to the latest edition of the Financial Services SpeedRead, a collection of bite-sized updates designed to help you keep on top of key regulatory developments in financial services over the preceding fortnight. Please get in touch if you want to explore any of the topics covered in this fortnight's edition of Financial Services SpeedRead in more detail.

Financial Markets

1. FCA publishes Primary Market Bulletin 55

On 17 April 2025, the FCA published Primary Market Bulletin 55 which addresses outstanding items from previous Primary Market Bulletins (48 to 53) and consults on changes to the technical notes pending updates for the UK Listing Rules (UKLR), which came into force on 29 July 2024.

The FCA clarified that while there are five technical notes in the FCA's Knowledge Base which still refer to the pre- July 2024 UKLRs, companies and other market participants are expected to interpret references to the UKLRs in light of those now in force, until the notes are updated.

The FCA has also consulted on the new Public Offers and Admissions to Trading Regulations regime via two consultation papers: CP24/12, which closed in October 2024; and CP25/2, which closed in March 2025. The current guidance will continue to apply until the new regime comes into force.

2. FCA publishes consultation paper on data decommissioning

On 16 April 2025, the FCA published a consultation paper (CP25/8) on proposals to remove certain reporting and notification requirements imposed on firms. This follows on from the FCA's commitment to streamline the data collection process, and ensure data provided by firms are proportionate to what is necessary for the FCA's effective supervision. In a press release, the FCA stated that it expects that this proposal will help reduce the burden on approximately 16,000 firms.

Specifically, the FCA identifies three regular returns as viable for decommissioning, including:

• Form G: The Retail Investment Adviser Complaints Notifications Form;
• FSA039: Client Money and Assets; and
• Section F RMAR.

The FCA also proposes to amend SUP16 so as to remove reporting instructions which relate to returns that have already been deleted from the scheduling rules. Responses to the consultation can be provided by 14 May 2025.

3. FCA publishes multi-firm review of trading apps

On 11 April 2025, the FCA published a summary of its findings from its multi-firm review of trading apps (neo-brokers), which comprised firms of varying sizes and business models. The FCA's key findings from the review include:

• Target market: Manufacturers of trading apps and distributors of products sold on such apps should consider their PRIN 2A.3 and PROD 3 obligations. Examples of good practice when defining a firm's target market include introducing criteria based on customers age profile, experience and wealth, as well as clearly identifying the negative target market;
• Conflicts: Firms are expected to identify and manage potential conflicts when examining their revenue drivers. With consideration of the price and value rules under PRIN 2A.4, the FCA expects firms to assess whether a product or service delivers fair value to customers;
• Behavioural bias: Firms that use digital engagement practices should consider whether these practices are supporting positive customer interactions, rather than exploiting behavioural biases. For instance, the FCA found that allowing customers to receive information on where they were making losses and gains is likely to encourage good customer outcomes; and
• Appropriateness: Firms must ensure they gather relevant information through the appropriateness tests, to ensure that customers are aware of the risks involved in accessing high-risk or complex products. In terms of good practice, the regulator pointed to clear eligibility criteria and the use of lockout periods for customers who did not pass the test.

4. FCA publishes update on PISCES following consultation

On 10 April 2025, the FCA published an update following its consultation on the regulatory framework for the Private Intermittent Securities and Capital Exchange System (PISCES) sandbox in December 2024 (CP24/29). PISCES is intended to be a new platform aimed at enabling the intermittent trading of private company shares.

The FCA proposes to make various post-consultation changes to the proposed rules. These include (among others) changes to the rules regarding core disclosure requirements, legitimate omissions, corrections, presentation of disclosures, post trade event disclosures, complaints procedures and disciplinary arrangements and the rights of private action for breaches of the rules.

The FCA is now welcoming requests from prospective PISCES operators for preliminary feedback from the FCA on proposed operating models and draft rulebooks

A Policy Statement setting out final rules is expected to be published in June 2025.

5. ESMA finalises rules on firms' order execution policies under MiFID II

On 10 April 2025, ESMA published a final report setting out technical standards specifying criteria on how investment firms should establish their order execution policies, and assess their effectiveness.

The draft RTS include requirements in relation to: (i) the establishment of order execution policies by investment firms; (ii) procedures and criteria aimed at controlling effectiveness of these order execution arrangements and order execution policies; (iii) requirements for firms' execution of client orders through own account dealings; and (iv) how firms should deal with specific client instructions.

The final report has now been sent to the European Commission. ESMA will provide further technical guidance if so requested by the European Commission.

6. ESMA publishes letter to European Commission on qualification of fractional shares under MiFID II

On 9 April 2025, ESMA published a letter dated 4 April 2025 addressed to the Commissioner for Financial Services and the Savings and Investments Union, Maria Luís Albuquerque, on the qualification of fractional shares under MiFID II.

In summary, the letter identified that neither MiFID II nor MiFIR offer a definition of shares or fractional shares. As a result, these instruments are left to be defined and governed by national or case law.

The letter also mentions ESMA's efforts to protect retail investors investing in fractional shares. In 2023, for example, ESMA issued a public statement on situations where fractional shares could be structured as derivatives. Still, ESMA's position is that the transparency requirements for fractional shares under MiFID II and MiFIR remain unclear. Accordingly, in its letter, it requests that the European Commission consider providing clarity on the qualification of fractional shares.

7. ESMA publishes technical advice on MiFID II research provisions relating to the Listing Act

On 8 April 2025, ESMA published its Final Report providing technical advice to the European Commission on the implementation of amendments to the Prospectus Regulation, Market Abuse Regulation and MiFID II in the context of the Listing Act (Regulation (EU) 2024/2809 and Directive (EU) 2024/2810).

Currently, the MiFID II Delegated Directive ((EU) 2017/593) sets out the conditions that the provision of research by third parties to investment firms must meet in order not to be regarded as inducements.

ESMA's report focusses on changes to the MiFID II Delegated Directive relating to the payment for research and execution services. Annexed to the report is a mark-up of proposed amendments to Article 13 MiFID II Delegated Directive, which seeks to align it with the payment option introduced by the Listing Act, enabling joint payments for execution services and research irrespective of market capitalisation of the issuers.

ESMA will monitor market developments and prepare a report by December 2028, assessing the impact of the new payment options and the quality and availability of research.

Banking and Prudential

8. PRA publishes update on modification by consent of the Liquidity Coverage Ratio part of the PRA Rulebook

On 17 April 2025, the PRA published an update on the modification by consent of the Liquidity Coverage Ratio (CRR) Part of the PRA Rulebook to include specific third country bonds under Article 11(1)(d) in Level 2A High Quality Liquid Assets, subject to a cap on the amount recognised.

The PRA has currently paused the process and withdrawn the modification to address technical comments and clarification requests raised. It aims to clarify its approach once this is finalised.

Meanwhile, firms are not expected to amend their approach to recognising third country covered bonds under the relevant Parts of the PRA Rulebook.

9. FCA consults on further proposals to support the new regime for Consumer Composite Investments

On 16 April 2025, the FCA published a consultation paper containing proposals to support the new regime for Consumer Composite Investments (CCIs). Under the FCA's proposed rules, a CCI is an investment where the returns are dependent on the performance of, or changes in, the value of indirect investments. This includes funds, structured products, insurance-based investment products, contracts for difference and other complex investments like derivatives. The regime will apply to any firm that manufactures or distributes a CCI to retail investors in the UK.

The purpose of the consultation is to consult on the remaining issues that were not covered in the FCA's initial consultation on the matter, CP24/30. The key proposals relate to:

• a revised approach to the calculation of transaction costs;
• revisions to current cost disclosure requirements under the MiFID Org Regulation (2017/565);
• transitional provisions to allow firms flexibility to move across to the new regime as soon as they are ready; and
• consequential amendments to the FCA Handbook.

Responses to the consultation can be provided by 28 May 2025. The FCA will then issue a policy statement with final rules in late 2025 which will include feedback from CP24/30.

10. PRA publishes its business plan for 2025-26

On 10 April 2025, the PRA published its strategic priorities and workplan for 2025/26, focusing on maintaining safety and soundness in the banking and insurance sectors, enhancing competitiveness and growth, and improving operational effectiveness.

The PRA's strategic priorities include:

• ensuring the safety and soundness of the banking sectors and ensuring continued resilience;
• identifying new and emerging risks and developing international policy;
• supporting competitive, dynamic and innovative markets; and
• running an inclusive efficient and responsive regulator within the central bank.

11. ESMA publishes Final Report on Systematic Internaliser notifications, the volume cap, and circuit breakers

On 10 April 2025, ESMA published a Final Report proposing new technical standards for investment firms acting as SIs, amendments to existing RTS 3 (Commission Delegated Regulation 2017/577) on volume caps and transparency calculations, and new requirements for circuit breakers in trading venues. These updates follow from the MiFIR/MiFID II Review and the implementation of DORA and include, at a high level:

• SI notifications: A standard template for firms to notify NCAs where they meet the SI definition, or opt into the SI regime. To reduce administrative burden, ESMA shortened the template and extended the notification period from two weeks to 20 days;
• Volume cap and transparency calculations: Proposed amendments to RTS3 with a focus on ad-hoc requests from ESMA and NCAs, derivative trading obligation reporting, and single volume cap reporting; and
• Circuit breakers: recast RTS to incorporate new requirements on circuit breakers in light of DORA.

ESMA submitted the final report to the European Commission on 10 April 2025. The Commission has three months to decide whether to endorse the proposed amendments.

12. FCA publishes annual work programme for 2025-2026

On 8 April 2025, the FCA published their 2025-2026 annual work programme. The FCA's key objectives, summarised as four strategic priorities are: (i) being a smarter regulator (more efficient and effective); (ii) fighting financial crime; (iii) supporting growth; and (iv) helping consumers navigate their financial lives.

The FCA seeks to achieve this through the following:

• Streamlining data collection and improving regulatory interaction;
• Digitising and improving the authorisation process;
• Enhancing the supervision model;
• Improving use of intelligence and data to act on harm; and
• Optimising operational performance.

Fund Management

13. ESMA publishes guidelines and technical standards on liquidity management tools for funds

On 15 April 2025, ESMA published two final reports containing (i) draft RTS on liquidity management tools (LMTs) under the AIFMD and UCITS Directive (see here); and (ii) Guidelines on LMTs of UCITS and open-ended AIFs (see here). The intention of the RTS is to clarify the functioning of LMTs, mitigate financial stability risks and help better equip EU fund managers when managing the liquidity of funds especially in cases of market stress.

In the draft RTS and Guidelines, ESMA outlines (amongst other things) policies and guidelines to assess the suitability of LMTs based on the fund's legal structure, investment strategy, redemption policy, liquidity profile, investor base, and distribution policy. These LMTs include, as examples, redemption gates, suspension of subscription, redemptions or repurchases, and redemption fees.

The Guidelines will be translated after the adoption of the draft RTS by the European Commission. Upon publication of the translations, NCAs will have two months to notify ESMA whether they comply or intend to comply the Guidelines and the Guidelines will apply from the date of entry into force of the RTS. However, any funds existing before the entry into force of the RTS will have twelve months to comply with the Guidelines.

14. FCA and HM Treasury consult on AIFM regulations

HM Treasury published a consultation paper on the regulatory framework for asset managers, proposing changes to the framework for AIFMs in the UK . On 5 April 2025, the FCA published a parallel Call for Input in relation to the same. The proposed amendments seek to eliminate unnecessary regulations, reduce administrative burdens, and provide flexibility for cross-border business, aligning with international standards.

At a high level, the new requirements will:

• Repeal AIFMD requirements: the Treasury proposes to repeal AIFMD's firm-facing legislative requirements and replace them with FCA-developed rules; and
• Introduce scope and threshold changes: the Treasury suggests changing the scope of firms subject to the UK AIFMD regime and removing the threshold that determines when a firm is subject to the full AIFMD regime, instead tailoring regulatory requirements based on firm size.

Specific proposals for reform include:

• Venture capital and growth capital funds: a separate regime is being considered for these funds due to their economic importance and distinct characteristics;
• Listed close-ended investment companies: Tailored rules are proposed for listed cloes-ended investment companies, considering their unique structure and broader regulatory framework;
• Depositaries: proportionate alternatives for depositary requirements are being explored, especially for unauthorised AIFs aimed at professional investors; and
• Remuneration and prudential requirements: a review to ensure these rules are proportionate and effective.

HM Treasury's consultation closes on 9 June 2025, and the FCA's Call for Input is open for comments until 9 June 2025.

Senior Managers and Governance

No new entries.

Financial Crime

No new entries.

Retail Services

15. FCA publishes review of treatment of vulnerable customers by retail banks

On 12 April 2025, the FCA published the findings from its multi-firm review on how retail banks and building societies approach the treatment of customers in vulnerable circumstances involving bereavement and power of attorney. The review considered the approach taken in light of the Consumer Duty, and the FCA's guidance on fair treatment of vulnerable customers (FG21/2).

The review considered the following four areas, identifying good practice and areas for improvement within each:

• Policies and procedures: The FCA found that firms generally had clear vulnerable customer policies and procedures, which were accessible to staff through a central repository, along with mechanisms to ensure that policies and procedures did not prevent good outcomes in complex cases. However, it also noted evidence that staff were unclear of the actions they should take and support they could provide in an emergency. A further area of improvement related to instances where firms' policies and procedures in response to suspected fraud or financial abuse caused customers to experience extended periods where they were unable to access funds to pay essential bills.
• Identifying and responding to customer needs: The FCA noted that firms had developed systems to enable customers to disclose their needs, and that others sought to proactively identify customers potentially at risk of being in vulnerable circumstances (through transaction patterns). It appreciated firms' use of AI to highlight potential vulnerability. The FCA also noted that firms should focus on actively identifying information that could indicate vulnerability, and that it had observed training and competency issues amongst staff at certain firms which were not rectified.
• Outcomes testing and monitoring: Firms generally had outcomes monitoring and testing processes in place. Where issues had been identified firms were generally making changes to their testing and monitoring processes. However, management information did not give a consistently clear picture of customer outcomes, and management information reports to senior committees lacked detailed commentary or were unclear.
• Customer journeys: Firms generally showed consideration of how they could adapt their bereavement/PoA customer journeys, and mostly had dedicated bereavement teams. Areas for improvement were that most firms had limited channels available for attorneys to access the customer's account, and that customers were often having to repeat information to different staff issues/had their cases delayed or dropped as a result of being 'lost' in the firms' systems.

The FCA have written to the firms which were subject to the review with their findings and the expected next steps.

Digital Finance and Fintech

16. ESMA publishes new Q&As MiCA

On 11 April 2025, ESMA published new Q&As in relation to MiCA, specifying the following:

• Registered AIFMs and MiCA: AIFMs referred to in Article 3(2) of AIFMD (which are exempt form authorisation under the Directive and therefore must only be registered), are not able to provide crypto-asset services on the basis of a notification under Article 60(5) MiCA; and
• Copy trading services under MiCA: With respect to whether copy trading services fall within the scope of portfolio management or any other crypto-asset services listed in Article 3(1)(16) MiCA, ESMA referred to its previous guidance on the matter in (i) the MiFID Q&As; and (ii) its Supervisory Briefing on copy trading. At a high level, however, the definitions of "portfolio management" are analogous to MiFID II, and should be assessed on a case-by-case basis by crypto-asset service providers.

Payments

17. The Bank of England issue response to the discussion paper on reviewing access to Real-Time Gross Settlement (RTGS) for settlement

On 8 April 2025, the BoE has published its response to the February 2024 discussion paper on reviewing access to real-time gross settlement (RTGS) accounts for settlement. See our previous edition of FSS here for details of the discussion paper.

The BoE states that respondents were generally supportive of the RTGS access review. It sets out in its response the actions it has taken in response to the feedback received, which include publication of:

• new rules regarding its expectations of RTGS participants in March 2025;
• a revised version of their RTGS access policy in April 2025, consolidating previous access policies for RTGS settlement accounts, settlement services, and omnibus accounts; and
• an updated guide for non-bank payment service providers who are seeking direct access to UK payment systems.

The BoE has also introduced stage gates which will enable applicants seeking access to RTGS to test connectivity and grow business in a controlled way. This would allow them to build internal capacity and confidence before launching services externally.

Finally, the BoE sets out details of its proposed future work in this area, including providing safeguarding facilities directly to non-bank payment service providers, and supporting the FCA and Treasury with broader reform work in this space to facilitate direct access to RTGS.

ESG

18. Directive postponing certain corporate sustainability reporting requirements published in the Official Journal of the European Union

On 16 April 2024, the Omnibus I Directive (EU) 2025/794 amending Directives (EU) 2022/2464 and (EU) 2024/1760 was published in the Official Journal of the European Union.

The directive is a part of the 'stop-the-clock' measures set out in the European Commission’s Omnibus proposals for reform to sustainability reporting requirements and postpones the following:

• the application of sustainability reporting requirements under the Corporate Sustainability Reporting Directive ((EU) 2022/2464) (CSRD) for two years;
• the transposition deadline for the Corporate Sustainability Due Diligence Directive ((EU) 2024/1760) (CSDDD) to 26 July 2027; and
• The first phase of CSDDD's application to in-scope companies by one year to 26 July 2028.

The Directive was formally adopted by the EU Council on 14 April 2025 and, following publication, entered into force on 17 April 2025. Member states must transpose the directive into national legislation by 31 December 2025.

The Directive was formally adopted on 14 April 2025 and entered into force on 17 April 2025.

19. ESMA publishes final report on ESG disclosures under the Benchmarks Regulation

On 9 April 2025, ESMA published a final report containing the outcome of its Common Supervisory Action (CSA) on ESG disclosures under the Benchmarks Regulation (EU) 2016/1011 (BMR). The CSA aims to assess how Benchmarks Administrators in the EU comply with the BMRs ESG disclosure requirements.

Generally, ESMA identifies that the lack of guidance on the definition and calculation of ESG factors results in divergent and inconsistent calculation and disclosure practices across administrators and benchmarks. Additionally, the CSA outlines inconsistent approaches in the underlying assumptions that administrators use for the determination of the factors. The report contains additional clarification on ESMA's expectations, and recommendations to the European Commission for potential amendments to Level 2 measures.

Following the report, ESMA will continue to liaise with NCAs on the topic, and provide technical advice to the European Commission on potential future amendments to the BMR relating to ES disclosures.

Other

20. FCA establishes presence in the US and APAC as part of new strategy

On 15 April 2025, the FCA published a press release on its decision to establish a presence in the United States and Asia-Pacific (APAC). The regulator believes that securing a presence in these key regions will help facilitate access of major international investors to the UK as a global hub for financial services.

Camille Blackburn, who is based in Australia and has been a director of wholesale buyside at the FCA since 2022, will be establishing a regional office from July 2025 as the FCA's APAC director. Through this role, Camille will support financial services firms through the regulatory landscape when entering the UK market or raising capital, as well as UK firms who wish to expand into the APAC region.

In the US, Tash Miah, who has been with the FCA since 2022, has been working at the British Embassy in Washington, DC, since April. She will be helping advance UK-US financial services policy and regulatory cooperation by working closely with the Department for Business and Trade.

21. FCA's Suman Ziaullah publishes reflections on operational resilience

On April 15 2025, Suman Ziaullah, Head of Technology, Resilience, and Cyber at the FCA, published a blog post reflecting on the conclusion of the operational resilience transition period. Mr. Ziaullah stressed the importance for firms to "expect the unexpected and be prepared to maintain their services in all severe but plausible scenarios to prevent intolerable harm."

Ziaullah identified three key characteristics of the most resilient firms:

• Rigorous scenario preparation: These firms prepare for severe scenarios by creating challenging exercises designed to push the firm to its limits. Failures in these exercises provide valuable insights, uncovering vulnerabilities that might otherwise remain hidden until a crisis occurs;
• Robust communication plans: Resilient firms have adaptable communication plans that are regularly tested under pressure to ensure effectiveness in various situations; and
• Engaged senior management: Senior management and boards actively engage in and prioritize resilience efforts.

Mr. Ziaullah also highlighted the FCA's commitment to enhancing the sector's operational resilience through a collaborative approach and the sharing of insights.

22. Financial Services Regulatory Initiatives Forum publishes new edition of Regulatory Initiatives Grid

On 14 April 2025, the Financial Services Regulatory Initiatives Forum (comprised of the FCA, PRA, BoE, Payment Systems Regulator, and CMA, among others) published the 2025 Regulatory Initiatives Grid, a biannual publication aimed at setting out the regulatory pipeline over the next 24 months.

Some key milestones set out in the Grid include, but are not limited to:

• Review of the Consumer Duty: In Q3 2025, the FCA will publish a further Feedback Statement and action plan following its call for input on the Consumer Duty;
• Open banking regulatory framework: HM Treasury is working to create a long-term framework for open banking and will publish a statutory instrument in relation thereto in Q4 2025;
• Prudential treatment of cryptoasset: the PRA is amending the PRA Rules to implement the Basel standard for the prudential treatment of firms' exposures to cryptoassets and intends to publish a consultation paper in Q4 2025, and a policy statement in Q2 2026; and
• Modernising the redress framework: Following the FCA's joint call for input with the FOS, the FCA intends to consult on any proposed changes to the redress framework in Q2 2025;

Feedback can be provided on the Grid via online survey or email at FSRIFSecretariat@fca.org.uk.

23. HM Treasury and FCA publish policy paper on regulatory perimeter meeting

On 11 April 2025, HM Treasury published a policy paper outlining the details of their fourth annual meeting with the FCA to discuss the regulatory perimeter.

Key takeaways from the meeting include, but are not limited to:

• International competitiveness: The government reaffirmed its commitment to the FCA's secondary objective of international competitiveness and growth, with related work to be viewed through this lens;
• ESG ratings: The inclusion of ESG ratings within the regulatory perimeter was strongly welcomed by the industry;
• Buy-now-pay-later (BNPL) and critical third parties: Legislative progress has been made to include BNPL activities and the designation of critical third parties within the FCA's perimeter;
• Non-financial spread betting: The Economic Secretary to the Treasury (EST) agreed on the need for government and regulators to ensure consumers understand the risks associated with unregulated products like non-financial indexes and spread betting;
• Lending to small businesses: The FCA highlighted the need to amend the regulatory perimeter concerning lending to small businesses; and
• Appointed representatives: Concerns were raised about the oversight quality of principal firms over appointed representatives, which can lead to significant consumer harm. The FCA seeks legislative progress following the Treasury's Call for Evidence.

Authors: Penny Chamberlain, Junior Associate; Tiegan Cormie, Junior Associate and Roni Fass, Junior Associate.