The Financial Conduct Authority (FCA) has set a clear supervisory agenda for 2026 that blends cultural expectations with faster, targeted enforcement and pragmatic rule reform. As we look ahead to the rest of the year, below are a number of highlights investment managers should have on their radar.
Culture and non-financial misconduct (NFM)
The FCA’s new non-financial misconduct conduct rule takes effect on 1 September 2026, making behaviour such as bullying and harassment a breach of the Conduct Rules and incorporating NFM into fitness and propriety assessments. The new rules will sit alongside guidance published by the FCA in December.
With eight months to go, the FCA’s expectation is clear – you should start preparing now. How firm’s approach the rule change will depend on their size, scale and complexity, but key workstreams will include policy and procedures reviews, updates to governance processes (in particular, aligning HR and legal/compliance and assessing your detection methods) and staff awareness through tailored training sessions.
Off-channel communications
Off-channel communications remain a live regulatory risk. The FCA’s multi-firm review in August flagged weaknesses across policies, controls and behavioural compliance, and pointed to good practice: explicitly covering new technologies, prohibiting personal numbers in out-of-office replies, strengthening surveillance lexicons and using behavioural analytics to spot “channel hopping”, with stronger management information on breaches, trends and vendor oversight.
US Securities and Exchange Commission (SEC) actions on the topic reinforce the risk for global firms. The FCA expects fit-for-purpose policies, senior manager oversight, effective monitoring (including potential use of artificial intelligence) and alignment with global policies.
Artificial intelligence
The FCA continues to adopt a principles-based approach rather than implementing AI-specific rules, launching an AI Lab to support safe adoption. Key areas of focus include setting policies for AI use, particularly around personal data, security and business continuity planning, and ensuring there is still human oversight where AI informs client outcomes, trading, surveillance or compliance.
The FCA recently launched a review into the long-term impact of AI on retail financial services, which covers themes such as the future evolution of AI technology, the impact of AI on markets and consumers and the regulatory approach and the findings may impact how the FCA deals with the topic.
Enforcement: targeted and faster
Recent outcomes highlight continued focus on anti-money laundering, market abuse and individual conduct. High-profile fines and insider dealing cases underline the point. While the number of section 166 (skilled person) reviews fell in 2024/25 versus 2023, the FCA signals faster, more targeted action in priority areas.
Client categorisation changes
The FCA’s December consultation proposes a pragmatic reset. For individuals, the mandatory “2 out of 3” quantitative test would be removed; quantitative indicators may inform a broader qualitative assessment.
An alternative wealth route would allow opt-up at £10m+ net investable assets, alongside a strengthened qualitative test based on defined “Relevant Factors” (knowledge, experience, financial resilience, objectives and adverse indicators). Whilst no firm timeline is set, this is clearly an area to watch for investment managers, especially those operating in the HNWI space.
UK Alternative Investment Fund Managers reform
A first consultation is expected in H1 2026 to simplify and modernise the UK Alternative Investment Fund Managers regime, including thresholds, scope and potential burden reduction for smaller or specialist managers. The tone is broadly deregulatory, with investor protection guardrails to be shaped through consultation.
Financial crime
Tackling financial crime remains a core priority in the 2025/26 work programme, with five-year outcomes targeting slower growth in investment and authorised push payment fraud, stronger market integrity and more effective anti-money laundering processes. November 2025 saw a compulsory anti-money laundering questionnaire to UK firms; a second phase with money-laundering reporting officer interviews is expected. Firms should ensure controls are robust, evidenced and responsive to evolving risks.
Conflicts of interest and private assets valuations
Conflicts must be actively identified, managed and escalated – not left as static disclosures. The FCA’s January 2025 Private Assets Valuation Review highlights valuation-related conflicts where fees or incentives link to valuations, calling for robust valuation governance, independent challenge and clear documentation of judgement. Expect further FCA input following last year’s conflicts questionnaire.
Khadijah Hasan, paralegal, contributed to this article.
Subscribe to Ropes & Gray Viewpoints by topic here.
Stay Up To Date with Ropes & Gray
Ropes & Gray attorneys provide timely analysis on legal developments, court decisions and changes in legislation and regulations.
Stay in the loop with all things Ropes & Gray, and find out more about our people, culture, initiatives and everything that’s happening.
We regularly notify our clients and contacts of significant legal developments, news, webinars and teleconferences that affect their industries.