FCA wholesale markets report – aligning with FCA expectations

Replacing a number of individual portfolio letters with a single consolidated document, the FCA's first Wholesale Markets Regulatory Priorities report covers the full range of firms operating in UK wholesale markets and is addressed directly to boards and chief executives. Two priorities stand out as particularly pressing: preventing financial crime and market abuse, and managing conflicts of interest and conduct oversight.

Neither is a new concern for the regulator, but the level of specificity with which the FCA now describes what it has found, and the breadth of supervisory activity it is planning in response, marks a shift in tone that firms across the wholesale market should take seriously.

What has changed

In replacing the portfolio letter model, the FCA is signalling that firms should take an equally joined-up view of their obligations, engaging across functions, business lines and geographies rather than managing requirements in separate workstreams. By pulling supervisory expectations, policy developments and planned activity into one place, the report should be read as an indication of supervisory intent as much as a summary of the rules.

Key developments set out in the report include: 

• The FCA has moved beyond general expectations to identify specific gaps it has found across the market in financial crime controls, surveillance infrastructure and conflicts management.
• The regulator is shifting to a more outcomes-focused supervisory model, with less intensive attention on firms it considers low risk and stronger, faster action where harm is identified.
• A significant programme of multi-firm reviews is planned for 2026 across wholesale banks, brokers, benchmark administrators and corporate finance firms.
• Findings from these reviews will be used to shape broader market expectations, meaning firms not directly in scope should still pay attention to what emerges.

Underpinning all of this is the FCA's expectation that effective systems and controls are a baseline requirement, and that where serious failings are identified, enforcement remains a live option.

Financial crime and market abuse

In anti‑money laundering, the FCA has identified a familiar set of weaknesses, with business‑wide risk assessments failing to reflect actual risk, over‑reliance on third‑party due diligence, and a persistent underestimation of money‑laundering risks, especially in corporate finance.

With market abuse, the picture is more uneven, though the FCA has identified a number of clearly defined concerns. Firms with data quality problems feeding into their surveillance models often find that even well‑designed systems fail to produce useful output; in a number of cases, alert calibration generates volume without actionable intelligence; and governance of those models frequently falls short of what the risk demands. 

The FCA’s own figures for 2025 provide further context, showing that it received 3,806 suspicious transaction and order reports, 82% of which related to insider dealing – pointing to a persistent vulnerability in how large parts of the market handle inside information and supervise those with access to it. Where market structures and instruments continue to evolve, the FCA expects firms to be actively pursuing improvements in detection rather than treating existing systems as adequate. 

Conflicts of interest

The FCA acknowledges that good practice exists and has helped to simplify the relevant rules but remains clear about where standards continue to fall short. This includes revenue-driven pay structures not sufficiently aligned with risk management outcomes, weaknesses in best execution governance, and gaps in documentation around transaction allocation and market soundings. These are recurring patterns across a market where the distance between the conflicts policy and how decisions are made in practice can be considerable.

Where that distance exists, its impact is reflected in a range of identifiable client outcomes. Even sophisticated counterparties can receive poor outcomes where conflicts are not properly disclosed or managed – mispricing, misuse of confidential information and biased advice among them.

Conflicts frameworks that function primarily as compliance documentation, activated for audit purposes but not genuinely embedded in day-to-day decision-making, offer limited protection against those outcomes.

Beyond the immediate concerns, the report makes clear that the FCA is alert to how conflicts arise as business models evolve. The new ‘commodity derivatives position limit regime’ creates additional responsibilities for trading venues, while issuer-pays credit rating models and benchmark provision carry inherent tensions that require active management rather than disclosure alone. Firms moving into digital assets and crypto should be asking honestly whether their existing conflicts arrangements extend to those activities in any meaningful way.

The supervisory programme for 2026

Planned supervisory activity for this year reaches most parts of the wholesale market. For wholesale banks, the FCA is initiating a broad strategy across trading and originating activities, with multi-firm reviews spanning market soundings, prime services, execution in emerging markets, allocation of primary market fixed income products and quantitative investment strategies.  

Benchmark administrators face a dedicated governance review focused on conflicts and conduct oversight, wholesale brokers will be assessed on their controls for non-financial misconduct, and corporate finance firms' compliance functions will be reviewed for their capacity to effectively challenge the business.

Running alongside this, the FCA will continue its suspicious transaction and order report supervision programme, monitor data quality across transaction reporting submissions and assess insider risk management maturity at a sample of banks and trading venues. From Q3 2026, it will also begin reviewing wholesale brokers' oversight of overseas branches and subsidiaries –  an area where previous supervisory work identified poor oversight and a failure to address problems once found.

What firms should do now

Although it is not binding guidance, the document provides a clear indication of supervisory priorities and the standards the FCA expects firms to meet. Firms should consider:

• Reviewing surveillance model effectiveness, including the quality of alert output, the appropriateness of review, and the effectiveness of escalation.
• Refreshing business-wide AML risk assessments to reflect the current client base, product mix and geographic exposure, and scrutinising whether reliance on third-party due diligence is genuinely appropriate rather than assumed.
• Assessing whether conflicts frameworks are operating in practice, including whether escalation routes are used, remuneration structures are aligned with conduct outcomes and governance documentation is contemporaneous.
• Considering whether existing frameworks extend meaningfully to newer business areas, including digital assets, and whether compliance functions have the independence and resource to push back on commercial decisions when it matters.
• Monitoring the outcomes of FCA multi-firm reviews as they are published, given the regulator's stated intention to use those findings to set broader market expectations.

Intended for boards and chief executives, the report will have its greatest impact where it is used to prompt serious, senior‑level challenge about whether existing controls are genuinely fit for purpose, rather than absorbed into business‑as‑usual compliance.

Contact Rebecca Deane for more information on the FCA’s wholesale markets priorities and how to meet regulatory expectation.