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Private markets took centre stage this fortnight. On 11 May, FCA deputy chief executive Sarah Pritchard told the Investment Association’s Private Markets Summit that UK private markets now hold close to £1.2 trillion in assets, and confirmed that HM Treasury will consult later this year on reforming the rules for alternative investment fund managers, with the FCA setting out its own proposals to regulate smaller funds more lightly and larger ones more firmly. That message arrived wrapped in a warning. The regulator’s live work on valuations and conflicts of interest, and its support for the Bank of England’s system-wide stress exploration of private markets, tells fund managers that lighter rules will be matched by harder scrutiny of whether first-line controls actually hold under pressure.
The period also delivered a joint FCA, Bank of England and HM Treasury statement on the cyber risks of frontier AI, a £755,000 fine and ban for former adviser Frank Breuer, a new FCA review of how investment firms treat bereaved customers, and chief executive Nikhil Rathi’s call for a system-wide reset on financial crime. The PRA published its 2025 firm feedback survey, Hamilton Lane secured FCA approval for a UK Long-Term Asset Fund, and the FCA set out contingency planning for its motor finance redress scheme as the legal challenge heads to the Upper Tribunal. The common thread is proportionate rules, evidenced controls, and a regulator increasingly willing to test both.
The FCA Promises Lighter Rules for Private Markets, and Harder Questionsdummyanimatedrotating
On 11 May 2026, Sarah Pritchard used her speech at the Investment Association’s Private Markets Summit to make a promise and set a price. The promise is proportionate reform. The price is evidence. With UK private markets approaching £1.2 trillion in assets under management, the FCA has concluded that the same rulebook cannot sensibly apply to a £300 million credit fund and a £30 billion infrastructure platform. Later this year HM Treasury will consult on changes to the regime governing alternative investment fund managers, and the FCA will publish proposals to draw the line more decisively by size and market impact.
- The scale: UK private markets fundraising reached £58.7 billion last year, with £25 billion invested into more than 1,400 UK businesses, over half of them outside London. Long-Term Asset Fund assets grew from £5 billion to £7.5 billion in under a year, across ten managers running 15 umbrella LTAFs and 29 sub-funds, with six more launched already in 2026.
- The warning shot: Pritchard pointed to a major US private credit firm forced to cap investor withdrawals after redemption requests worth billions arrived in a single quarter. Her diagnosis was precise: confidence did not collapse because controls visibly failed, but because investors could not be sure they had not.
- The live scrutiny: The FCA’s March 2025 valuations report has already changed practice, and its multi-firm review of conflicts of interest is underway with findings due later this year. The regulator is also supporting the Bank of England’s system-wide exploratory scenario on private markets and co-leading Financial Stability Board work on leverage.
- The conditions of confidence: Pritchard located confidence in three places: firms with strong first-line controls, a proportionate regulator focused on risks that matter, and a connected system of domestic and international oversight through IOSCO and the FSB.
Read the subtext. The FCA is offering to remove obligations from smaller managers precisely because it intends to concentrate its attention on whether the basics, underwriting discipline, operational resilience and valuation governance, are real rather than documented. Proportionate is not the same as relaxed.
The managers who benefit most from lighter AIFM rules are exactly the ones least able to absorb a supervisory visit that finds valuation governance is a spreadsheet and a quarterly nod. Before the Treasury consultation lands, fund boards should commission an honest test of one question: if redemptions spiked in an illiquid strategy next quarter, could the firm evidence its valuation judgements to investors within days? If the answer rests on trust rather than documented process, the gap is real, and the FCA has just told you where it will be looking.
Engagement is now a strategic act, not a courtesy. Pritchard explicitly invited firms to shape the reform before proposals are fixed. CCOs and fund boards that wait for the consultation paper will be responding to other firms’ priorities. Those that engage now, with specific evidence of where current AIFM obligations add cost without protecting investors, will help draw the proportionality line where it serves them.
Regulatory Updates
FCA, Bank of England and HM Treasury Warn on Frontier AI Cyber Riskdummyanimatedrotating
On 15 May 2026, the FCA, the Bank of England and HM Treasury issued a joint statement on frontier AI models and cyber resilience. Their judgement is blunt: the cyber capabilities of current frontier AI models already exceed what a skilled human practitioner can achieve, at greater speed, scale and lower cost. The authorities stress this introduces no new rules; it reinforces existing operational resilience expectations as the threat environment hardens.
- Governance first: Boards and senior management are expected to understand frontier AI risk well enough to set strategy and oversee how control functions respond, including investment in systems no longer covered by vendor support and whether cyber insurance is adequate.
- Six domains of action: The statement covers governance, vulnerability identification and remediation at speed, third-party and supply-chain risk including open-source software, protective controls, and response and recovery, pointing firms back to the cyber resilience practices the authorities published in October 2025.
- Where to look next: Firms are directed to the Cross Market Operational Resilience Group, whose Frontier AI Risk Mitigation Webinar ran on 14 May 2026, and to National Cyber Security Centre guidance on preparing for vulnerability patch waves.
The word doing the heavy lifting is governance. This statement is written so that, after the next major AI-enabled breach, the first question to the board is whether it understood the risk and resourced the response. Asset managers who treat cyber as an IT line item rather than a board-level resilience question are now misaligned with three authorities at once. Put frontier AI on the next risk committee agenda and minute the discussion.
FCA Opens Review of How Investment Firms Treat Bereaved Customersdummyanimatedrotating
On 13 May 2026, the FCA launched a review of how consumer investment firms support bereaved customers, citing research that fewer than half, 47%, felt they received the support they needed. The review covers platforms, advisers and wealth managers, and examines the full journey from notification of a bereavement to settlement or transfer of investments.
- What is in scope: How firms communicate, how they support vulnerable customers, service standards, and crucially how fees are handled on bereaved accounts. From May 2026 the FCA will contact selected firms, with findings published later this year.
- The framing: Kate Tuckley, head of consumer investments, called bereavement processes “a real test of a firm’s culture.” The review is a priority under the Consumer Investments Regulatory Priorities and sits within the FCA’s broader Consumer Duty work, following similar findings in retail banking and insurance.
Consumer Duty is being enforced through the moments firms find least convenient to get right. Bereavement is operationally messy and commercially marginal, which is exactly why the FCA has chosen it as a culture test. Wealth managers should pull a sample of bereavement cases from the last twelve months and check how long settlement took and whether fees kept accruing on frozen accounts. That data exists; the question is whether anyone senior has looked at it.
Rathi Calls for a System-Wide Reset on Financial Crimedummyanimatedrotating
Speaking at the FCA’s financial crime conference on 14 May 2026, chief executive Nikhil Rathi argued that organising the response to financial crime around institutional boundaries no longer works against networked, technology-enabled criminal groups. He pressed for greater information sharing, smarter use of technology, and an honest acknowledgement that the system cannot defend every threat equally and must prioritise.
- The numbers: The FCA’s intelligence infrastructure has now processed over 52 million records, and from June the regulator will begin wider sharing with law enforcement, starting with more than 5,000 records via the Police National Database. Investment fraud victims lose over £25,000 on average.
- Co-ordinated firepower: With the National Crime Agency the FCA has published nine economic crime priorities, and its recent finfluencer week of action saw 17 regulators from 14 countries deliver a guilty plea, nearly 40 warnings and over 100 account takedown requests. The UK assumes the presidency of the Financial Action Task Force from July 2026.
Rathi’s candour on prioritisation is the signal to read. When the regulator says openly it cannot chase every lead, it is also saying firms can no longer assume a tip-off will be actioned. That raises, not lowers, the bar on first-line controls. MLROs should revisit whether their firm is using the private-to-private information-sharing powers under the Economic Crime and Corporate Transparency Act, because the FCA has just made clear it expects them to.
FCA and SRA Launch Joint Review of the Claims Management Marketdummyanimatedrotating
On 6 May 2026, the FCA announced a review of the claims management market, working with the Solicitors Regulation Authority, after continued concern that some claims management companies and law firms are failing consumers through aggressive marketing, misleading advertising, unfair exit fees, and sign-ups without informed consent.
- The scope: The review will test whether consumers receive fair value, whether existing price caps remain fit for purpose where free redress exists, and whether fee and funding structures create conflicts of interest. The FCA may recommend legislative change, including stronger compensation mechanisms where CMCs cause harm.
- Action already taken: The FCA has removed or amended 800 misleading adverts, enabled more than 28,000 consumers to exit contracts free of charge, and secured fee reductions protecting over 500,000 consumers. As of 30 April 2026 the SRA had 109 open investigations into 76 firms. Further detail was promised by mid-May.
The motor finance redress scheme created the conditions for a CMC feeding frenzy, and the regulators are now closing the gap between conduct rules and the firms operating at the edge of them. Lenders with concerns about specific CMCs have an explicit invitation to put evidence to the FCA. Firms sitting on patterns of meritless or duplicated claims should treat that invitation as an expectation.
FCA Strengthens Executive Team With Markets and Operations Appointmentsdummyanimatedrotating
On 13 May 2026 the FCA confirmed two permanent appointments. Simon Walls, who joined in 2006 and has led the markets directorate on a temporary basis since 2024, becomes permanent executive director, markets, providing continuity on wholesale markets reform. Johan Sekora, formerly global head of financial crime prevention at Swedish bank SEB, joins as chief operating officer at the start of June, relocating from Stockholm.
- The signal: Nikhil Rathi tied both appointments to the FCA’s ambition to be a “smarter regulator.” Sekora’s background in data, AI and financial crime collaboration reinforces the operational direction set out in the same fortnight’s financial crime speech.
Leadership appointments are strategy made visible. Putting a financial crime and data specialist in the chief operating officer seat tells you where the FCA intends to spend its operational capital. Expect more data-led, intelligence-driven supervision, and fewer points where firms can rely on the regulator simply not noticing.
Proportionate regulation is coming to private markets, yet the burden of proof on controls is rising, not falling.Asad Bukhory
PRA Developments
PRA Firm Feedback Survey 2025 Points to Proportionality and Co-ordinationdummyanimatedrotating
Published on 15 May 2026, the PRA’s 2025 firm feedback survey reached 814 PRA-regulated firms or groups, nearly double the 2024 exercise, with 439 firms responding, up from 303. The expansion, notably the inclusion of all credit unions for the first time, widened the sample considerably. Average scores were slightly lower than 2024 across most topics, though stripping out credit union responses brought scores close to the prior year.
- What firms valued: The most positive scores went to the PRA’s articulation of its regulatory objectives and the effectiveness of supervisory relationships, with firms praising the approachability and professionalism of supervisory teams. Scores on the regulatory framework, rules and policy were lower.
- Four recurring themes: Firms want clearer feedback and transparency on the rationale for supervisory work and data requests, better co-ordination between PRA teams and with the FCA and international regulators, greater proportionality focused on the main risks, and earlier visibility of supervisory workplans.
PRA response: the regulator points to SoP1/25 on its approach to policy, the Future Banking Data project, and the Strong and Simple initiative as live responses. The 2026 survey will be issued in August.
PRA Regulatory Digest, April 2026: SM&CR Phase 1 Reforms in Focusdummyanimatedrotating
Published on 1 May 2026, the PRA’s April Regulatory Digest consolidates the month’s prudential activity. The headline item for governance teams is PS12/26, the Phase 1 policy statement on the Senior Managers and Certification Regime, issued on 22 April alongside a parallel FCA policy statement. Phase 1 trims the regime to operate more proportionately; a more far-reaching Phase 2 consultation will follow, with HM Treasury to bring forward a draft Bill.
- Also in the Digest: CP6/26 on high loan-to-income mortgage lending, CP7/26 on 2026/27 regulated fees, the PRA Business Plan 2026/27, and a PRA statement welcoming HM Treasury’s reforms to the risk transformation regime for insurance special purpose vehicles and protected cell company captives.
- Watch the deadline: The Low Impact Amendments Consultation LIAC01/26 on proportional consolidation in the Groups Part of the PRA Rulebook closes on 21 May 2026, with implementation proposed for July 2026.
Fund Launches
Hamilton Lane Secures FCA Approval for UK Long-Term Asset Funddummyanimatedrotating
US alternative investment manager Hamilton Lane received FCA approval, effective 15 May 2026, to launch a Long-Term Asset Fund for the UK market, extending the firm’s evergreen private markets platform into the UK’s growing semi-liquid wrapper. The approval makes Hamilton Lane one of the latest entrants in a fast-growing segment the FCA itself is watching closely.
- Market context: Per the FCA, LTAF assets grew from £5 billion to £7.5 billion in under a year, across ten managers, 15 umbrella LTAFs and 29 sub-funds, with six new vehicles launched in 2026 before this approval.
- Why it matters: The LTAF is the principal route through which UK defined contribution pension schemes and, increasingly, retail investors gain access to private markets. Each new launch widens the population of investors holding illiquid assets in an open-ended structure, the precise governance challenge the FCA’s valuations and liquidity work is built to address.
The LTAF Retailisation Wave Acceleratesdummyanimatedrotating
Hamilton Lane’s approval is not an isolated event but part of a structural shift the FCA spent this fortnight describing. With ten managers now running LTAFs and assets up 50% in under a year, the vehicle has moved from novelty to mainstream distribution channel for private markets exposure.
- The trajectory: Six LTAFs launched in 2026 before Hamilton Lane, building on a base that did not exist three years ago. The growth is concentrated in private credit and diversified private markets strategies aimed at long-term savers.
- The governance corollary: Every LTAF launch is also a liquidity and valuation commitment. Managers entering the market should expect the FCA’s March 2025 valuations expectations, and its live conflicts of interest review, to apply to them from day one, not after the fund scales.
Enforcement
Frank Breuer: £755,000 Fine and a Lifetime Ban for Integrity Failuresdummyanimatedrotating
On 12 May 2026 the FCA fined Frank Breuer £755,000 and banned him from UK financial services for repeatedly acting without integrity and putting customers at risk for personal gain. Breuer was joint owner and sole director of Bluesky Wealth Management, which advised on investments and pensions. Although authorised for defined benefit pension transfer advice, the firm held no appropriate professional indemnity insurance from April 2019.
- The conduct: Breuer carried out at least 16 defined benefit pension transfers knowing the firm was uninsured, leaving customers exposed if his advice proved wrong. He then repeatedly misled the FCA about the firm’s insurance position.
- The asset stripping: After agreeing to FCA restrictions in October 2019, Breuer ignored them, paying himself large dividends, taking personal loans and moving money through connected accounts. He placed Bluesky into insolvency in April 2023, leaving at least £214,772.88 of customer liabilities for the Financial Services Compensation Scheme.
- The basis: Therese Chambers, joint executive director of enforcement and market oversight, said Breuer “feathered his own nest” while evading compensation. He breached Statement of Principle 1 and Individual Conduct Rule 1 by acting without integrity. The penalty includes disgorgement and interest.
Two features make this case a marker. First, the FCA pursued the absence of professional indemnity insurance as a customer-protection failure in its own right, not a technicality. Second, it treated the deliberate stripping of firm assets to dodge redress as an integrity breach. Any adviser firm carrying defined benefit transfer permissions should confirm today that its PI cover is live, adequate and not subject to exclusions that would leave clients unprotected. The FCA has shown it will treat a coverage gap as conduct, not paperwork.
Money Launderer Returned to Prison Over Unpaid Confiscation Orderdummyanimatedrotating
On 8 May 2026, at the City of London Magistrates’ Court, convicted money launderer Richard Faithfull, 36, was sentenced to an additional 499 days in prison for failing to pay a confiscation order in full. Faithfull was jailed in 2021 for five years and ten months after an FCA prosecution for laundering £2.5 million as part of a trans-national organised crime group that handled the proceeds of at least seven overseas investment frauds.
- The shortfall: Faithfull was required to pay back £529,961 based on his available assets but had paid only £349,214.37. Steve Smart, executive director of enforcement and market oversight, said it was “right he is put back behind bars,” and the outstanding debt remains payable, accruing interest, even after the default sentence.
The FCA is signalling that confiscation orders are not a one-off ritual but a debt it will pursue, with custodial consequences for non-payment. For firms, the relevance is the supply chain: this money moved through accounts and the proceeds came from boiler-room investment fraud. The enforcement is downstream, but the prevention is upstream, in the account-opening and transaction-monitoring controls Rathi spent the same week pressing firms to strengthen.
Three Arrested in FCA Crackdown on Unlawful Financial Promotionsdummyanimatedrotating
On 1 May 2026 the FCA confirmed three arrests in an investigation into suspected illegal financial promotions, carried out with the Eastern Regional Special Operations Unit. Two homes in the Chelmsford and Romford areas were searched and all three individuals were interviewed under caution. The investigation is ongoing.
- The legal frame: Communicating unauthorised financial promotions is an offence under sections 21 and 25 of the Financial Services and Markets Act 2000, and breaching the General Prohibition under sections 19 and 23, each carrying up to two years’ imprisonment. Misleading statements can attract up to ten years under the Financial Services Act 2012.
The financial promotions regime is being enforced with police support and dawn-raid tactics, not just supervisory letters. Firms that approve promotions for unauthorised persons under section 21 should re-examine whether their approver permissions and ongoing monitoring are robust. The gateway is tightening, and the FCA is demonstrating it will reach the individuals behind non-compliant promotions, not only the firms.
Market Developments
FCA Opens Competition Act Investigation Into Mastercard, PayPal and Visadummyanimatedrotating
On 6 May 2026, following financial reporting by PayPal Holdings, the FCA confirmed it is investigating Mastercard, PayPal and Visa under Chapter I of the Competition Act 1998, and Mastercard and Visa under Chapter II, for suspected anti-competitive conduct linked to the funding and usage of PayPal’s digital wallet. The FCA has reached no conclusions and made no findings.
- The powers: Chapter I prohibits agreements and concerted practices that restrict competition; Chapter II prohibits abuse of a dominant position. The FCA’s competition powers are separate from its Financial Services and Markets Act enforcement toolkit, and cases can also be brought by the Competition and Markets Authority.
- What happens next: The FCA is gathering evidence and may issue a statement of objections setting out a provisional view of infringement, though not all cases reach that stage. Addressees would then have the chance to make representations before any final decision.
The FCA flexing its competition jurisdiction over the largest payment networks is a reminder that its remit reaches well beyond conduct supervision. Payments and fintech firms should note that the regulator is willing to open Chapter I and Chapter II cases on its own initiative off the back of a competitor’s public disclosures. Commercial arrangements that look settled can become regulatory exposure.
Motor Finance Redress Scheme Heads to Tribunal as FCA Plans for No Schemedummyanimatedrotating
On 1 and 8 May 2026 the FCA set out further advice on its motor finance compensation scheme after legal challenges sent the scheme rules to the Upper Tribunal. The FCA continues to back an industry-wide scheme as the quickest, fairest route to compensation, but the case is unlikely to be heard before October, and the regulator is now openly preparing firms for the possibility that the scheme, or parts of it, could be quashed.
- Where firms stand: Lenders were asked to submit implementation plans by 12 May 2026, though the FCA dropped the requirement for formal attestations. Complaints have been paused since 11 January 2024, a pause the FCA accepts cannot continue indefinitely.
- The contingency: The FCA told lenders to supervise against a central planning assumption of no scheme, preparing on a precautionary basis to handle complaints under normal statutory timeframes from mid-November 2026. Consumers have already waited over two years, and the FCA repeated that they do not need a claims management company charging over 30% of any award.
This is balance-sheet risk dressed as a process update. Telling lenders to plan for no scheme is the FCA instructing firms to ensure provisions and auditor engagement reflect a complaint-led outcome, not just the orderly scheme they hoped for. Finance directors and audit committees at motor finance lenders should be testing whether current provisioning survives the contingency the regulator has now made its central planning assumption.
Calendar
May 2026 (remaining)
- 20 May Bank of England Insurance taxonomy v2.2.0 PWD technical feedback deadline.
- 21 May PRA LIAC01/26 Low Impact Amendments consultation closes (proportional consolidation, Groups Part).
- 21 May PRA PS13/26 on insurance third-country branches published.
June 2026
- Early Jun Johan Sekora joins the FCA as chief operating officer.
- By Jun FCA begins wider intelligence sharing with law enforcement, starting with 5,000+ records via the Police National Database.
- 1 Jun PRA Regulatory Digest, May 2026, published.
July to Autumn 2026
- From Jul United Kingdom assumes the presidency of the Financial Action Task Force.
- Later 2026 HM Treasury consults on the AIFM regime; FCA publishes proportionate AIFM proposals.
- Later 2026 FCA conflicts of interest review, bereaved customers review and claims management review findings.
- From Oct Earliest likely Upper Tribunal hearing on the motor finance redress scheme.
Key Dates Later in 2026 and 2027
- Mid-Nov 2026 FCA precautionary planning assumption for motor finance complaint handling if no scheme proceeds.
- Later 2026 PRA and FCA SM&CR Phase 2 consultation expected, with an HM Treasury draft Bill.
- 1 Jan 2027 Basel 3.1 final rules, the SDDT simplified capital regime, and restated CRR rules take effect.
Sarah Pritchard told the Investment Association that confidence in private markets is lost not when valuations change, but when they change without explanation, or too late. So put the uncomfortable version to your own board: if a redemption surge hit one of your illiquid strategies next quarter, could you evidence your valuation judgement to investors within days, or would you be explaining yourselves only after the confidence had already gone?
We’d welcome your perspective. The best responses may feature in a future edition.
The defining move of this fortnight was the FCA offering UK fund managers a lighter rulebook while quietly raising the standard of evidence behind it. Sarah Pritchard’s private markets speech, the live valuations and conflicts work, and the support for the Bank of England’s system-wide stress exploration are not separate stories. They are one strategy: remove obligations that do not protect investors, and concentrate supervisory firepower on whether first-line controls genuinely hold.
For fund managers, this changes the compliance calculus. The old defensive posture, hold every permission and document every policy, is becoming a liability rather than a shield. A proportionate regulator is a more discerning one. It will ask smaller managers to do less, but it will expect what remains, valuation governance, liquidity management and operational resilience, to be real, tested and capable of standing up when an illiquid strategy meets a redemption surge.
The practical step this week is to stop preparing for the rules and start preparing for the questions. Pull one illiquid strategy and rehearse the valuation and liquidity narrative you would give investors under stress. If it depends on judgement no one has stress-tested, fix that before the Treasury consultation arrives. Engagement with the reform is open now, and the firms that shape it will be the ones that brought evidence, not opinions.
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