Your guide to this week in regulation

This week, we lead with the Financial Conduct Authority's (FCA's) review of its early and high growth oversight pilot, setting out good and poor practice across governance, risk management and resilience for fifteen rapidly growing firms. The findings are relevant for any firm scaling quickly (or intending to do so), since supervisory expectations on control frameworks rise in step with growth.

Elsewhere, the FCA has finalised rules on fund liquidity risk management, strengthening the tools authorised fund managers use to protect investors as funds become more complex. Meanwhile, the FCA has published its reflections on market readiness for the UK’s move to T+1 settlement in October 2027, flagging particular concern about buy-side firms’ preparation.

We conclude this week with the Payment Systems Regulator's (PSR's) Annual Report and Accounts for 2025/26, re-confirming legislative provisions to fold the PSR into the FCA and reporting progress on that consolidation alongside its ongoing work on fraud protection and open banking.

FCA reviews high-growth firm oversight

The FCA has published findings from its early and high growth oversight pilot, covering fifteen firms across asset management, wealth management and payments between July 2025 and March 2026.

The review set out examples of good and poor practice across five areas: 

• governance and senior management oversight
• risk management frameworks
• resourcing and scalability
• systems and management information, and
• financial resilience. 

Stronger firms had clear board structures, risk-focused committees, and proactive cyber and operational resilience arrangements, including preparation for emerging technologies such as AI. Weaker firms had not kept governance and control frameworks in step with growth.

The FCA has given individual feedback to all fifteen firms and expects other rapidly growing firms to assess their own arrangements against these findings. Any gaps identified need timely and proportionate action, and the FCA will use the insights to shape its ongoing supervisory approach to high-growth firms.

Read more on the FCA's review of high-growth firm oversight

FCA finalises fund liquidity rules

The FCA has published Policy Statement PS26/17, confirming final rules on liquidity risk management for authorised fund managers (AFMs) of UK UCITS schemes and non-UCITS retail schemes.

The changes promote the effective use of anti-dilution tools, clarify good practice for assessing the liquidity of securities held in funds, and introduce new guidance on liquidity stress testing at Annexes 5 and 6 of COLL 6. Money market funds remain outside the scope of the new guidance, though future work on the money market fund framework will consider how these changes should apply to them.

The new rules and guidance take effect on 1 February 2027, with transitional provisions running until 1 August 2027 for prospectus changes and the eligible market test on recently issued securities. AFMs need to review their liquidity risk management processes and stress testing arrangements ahead of implementation.

Read more on enhancing fund liquidity risk management

FCA reviews T+1 settlement readiness

The FCA has set out its reflections on market readiness for the move to T+1 settlement on 11 October 2027, following engagement with buy-side and sell-side firms, financial market infrastructures, third party providers and trade associations.

Most participants have met the FCA's expectations so far, with some ahead of schedule on system changes and testing. Others are considerably behind, particularly among buy-side firms, despite expectations set out in the FCA's Dear CCO letter. Common findings include inconsistent trade date allocation and confirmation, uneven adoption of standard settlement instructions, and gaps in third party providers sharing transition plans with clients.

The FCA will follow up with firms making insufficient progress and expects preparations to improve significantly over the coming year. Firms and their service providers need to finalise project plans, complete testing, and improve visibility of their own settlement failure rates ahead of the 2027 deadline.

Read more on T+1 settlement readiness

PSR reports on 2025/26 progress

The PSR has published its Annual Report and Accounts for 2025/26, covering progress on authorised push payment (APP) fraud protections, open banking, and competition and transparency in card markets.

The report confirms the Financial Services and Markets Bill contains provisions to abolish the PSR and transfer its functions to the FCA, preserving the substance and scope of its current regulatory framework. The PSR states it has made good progress on the consolidation, including operational changes and support for the legislative process, while continuing to work with the FCA, the Bank of England and HM Treasury on the National Payments Vision and next generation payments infrastructure.

Firms regulated by the PSR need to watch for further developments on the timing and detail of the transfer, and consider how their compliance and governance arrangements will map onto the FCA's regulatory framework once the consolidation completes.

Read more on the PSR Annual Report and Accounts 2025/26