Your guide to this week in regulation

This week, we see the Financial Conduct Authority (FCA) tighten its focus on consumer harm, weak controls and poor distribution oversight, while the Prudential Regulation Authority (PRA) continues the shift to a clearer UK prudential rulebook. This continues to show the regulators are focussed on firms having controls that work in practice, not only on paper, as growth, cost pressures and rule changes come together.

We lead with the FCA’s review of financial promotion approvers, which points to failings in governance, challenge and customer protection. That matters now as the FCA keeps pressure on Consumer Duty delivery and takes a sharper view of whether firms can evidence fair, clear and not misleading communications. Elsewhere, the FCA’s warning on fake motor insurance shows how fraud, vulnerability and digital distribution now meet in ways that can cause fast consumer harm, especially in a tight cost environment.

Meanwhile, the FCA’s Scale-up Unit shows the regulator pairing growth support with closer oversight. We conclude this week with two PRA updates, on third-country branches and CRR definitions, which underline the steady rewiring of UK prudential rules and the need for firms to plan early for change.

FCA flags gaps in promotion approvals

The FCA has found that some firms approving financial promotions are not meeting expected standards, following its latest review of the approver population. The review focused on firms operating under the financial promotions approval gateway introduced in February 2024, which requires permission to approve promotions for unauthorised persons. The FCA found some firms approved adverts with unsubstantiated claims, let retail investors see promotions meant for professional clients, and relied on third-party templates instead of proper checks

The FCA was clear that approvers play a critical gatekeeper role and must ensure promotions are clear, fair and not misleading, reflecting the Consumer Duty and wider conduct expectations. The FCA signalled it will continue supervision in this area and may take action where standards do not improve.

Read more on the FCA review of financial promotion approvers

FCA warns on fake insurance scams

The FCA has warned that young drivers face rising harm from fake motor insurance sold through social media, with 49% of 17 to 25 year olds buying cover via these channels and 39% unable to spot fraud.

The regulator highlights “ghost broking” where criminals pose as legitimate firms and sell policies that are fake, invalid or later cancelled, leaving consumers uninsured and exposed to fines, vehicle seizure and prosecution.

Key points for firms:

• Social media is a growing distribution and fraud vector, with 45% of young drivers trusting purchases made through these channels.
• Cost pressures increase vulnerability, with 1 in 7 struggling to afford insurance.
• Consumer harm risk is high, with customers unknowingly driving without valid cover.

Firms should reinforce controls over distribution channels, monitor for misuse of firm details, and support customer education. The FCA also urges consumers to avoid social media-only deals and use the Firm Checker to verify authorisation

Read more on young drivers warned about fake insurance sold on social media

PRA updates third‑country branch rules

The PRA has finalised changes to its framework for insurance third‑country branches, following consultation CP20/25. The updates aim to simplify requirements, improve clarity and support UK competitiveness.

Key takeaways for firms include:

• Higher subsidiarisation threshold raised from £500m to £600m of FSCS‑covered liabilities, reducing pressure to convert to a UK subsidiary.
• Simplified reporting regime, including removal of quarterly reporting and reinstatement of two annual templates.
• Rulebook consolidation, with existing reporting concessions embedded into PRA rules to reduce reliance on waivers.
• Updated guidance, including clarifications on ORSA, governance and reporting expectations for branches.

Most changes take effect from 31 December 2026, with some transitions extending to 2027.

Firms should now assess impact on branch structures, reporting processes and threshold exposure, and engage supervisors early where proportionality or waivers may be relevant.

Read more on PS13/26 – Insurance third-country branches

FCA opens scale-up support

The FCA has opened its Scale-up Unit to solo‑regulated firms, expanding support for fast‑growing financial services businesses. Firms can now apply for tailored regulatory support designed to help them scale in a controlled and sustainable way.

The initiative reflects the regulator’s focus on enabling growth while maintaining standards. It builds on a pilot already supporting dual‑regulated firms and will inform future policy development.

Key points:

• Dedicated FCA contact to guide firms through regulatory processes.
• Support for product development, including innovative offerings.
• Insight on policy change impacts to help firms plan ahead.
• Feedback loop into FCA policy, aiming to keep rules aligned with innovation.

The Scale-up Unit sits alongside existing FCA services, creating a clearer route from start-up to scale-up. Eligible solo‑regulated firms can apply to join the programme, with the current window open from 20 May to 22 June 2026.

Read more on FCA opening doors to support fast-growing financial firms

PRA restates CRR definitions

The PRA has confirmed its final policy to restate Capital Requirements Regulation (CRR) definitions within the PRA Rulebook, as part of the UK’s move away from retained EU law.

Most definitions will transfer directly into the PRA Rulebook Glossary with no material policy change, reflecting a “lift and shift” approach. However, the PRA has made targeted amendments to improve clarity and address technical issues.

Key points for firms:

• Definitions migrate from CRR to PRA Rulebook, with consequential updates across multiple rulebook parts.
• Scope is wide, covering banks, building societies, and PRA‑designated investment firms, and potentially other PRA‑regulated entities.
• Limited policy change, but clearer drafting and explicit definitions where these were previously implicit.
• Effective date aligns with Basel 3.1 implementation on 1 January 2027.

This forms part of HM Treasury’s broader plan to revoke remaining CRR provisions and embed key requirements in domestic regulation.

Firms should now review internal policies, models, and reporting frameworks against the new PRA glossary definitions and assess any downstream impacts.

Read more on PS14/26 – CRR Definitions