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Executive Summary
The FCA proposed a large consumer redress scheme on 7 October, with up to 14 million motor finance agreements potentially eligible for compensation. Separately, the Bank of England's Financial Policy Committee warned about elevated AI-driven equity valuations and geopolitical risks that could trigger sharp market corrections. The FCA also advanced its digital assets roadmap, publishing tokenisation guidance for asset managers and confirming the lifting of its ban on crypto ETNs for retail investors. In enforcement, BlueCrest Capital Management reached a US$101 million settlement with the FCA, ending a long-running case. St James Place launched a new passive multi-asset range priced at 0.20%, following a fee restructure prompted by long-standing criticism of its costs.
FCA Unveils Motor Finance Redress Scheme
BANKING, CONSUMER CREDIT, ASSET MANAGEMENT
The FCA on 7 October published consultation paper CP25/27 proposing a redress scheme for motor finance customers who may have been treated unfairly between 2007 and 2024. The regulator estimates that up to 14 million motor finance agreements could be affected, with the industry facing over £8 billion in redress payments alongside nearly £3 billion in implementation costs.
The consultation follows the Supreme Court's decision in Johnson v FirstRand Bank on 1 August 2025, which found that Discretionary Commission Arrangements (DCAs) created undisclosed conflicts of interest that rendered credit relationships unfair under the Consumer Credit Act. The ruling affects lenders, brokers, and the thousands of firms that securitised or invested in motor finance receivables.
KEY ELEMENTS INCLUDE:
- Scope: The scheme covers motor finance agreements (not leases) entered into between 6 April 2007 and 27 January 2021 involving DCAs, high commission arrangements, or undisclosed tied arrangements where brokers were restricted to a single lender
- Redress calculation: Based on 8% simple interest per annum on the difference between what customers paid and what they would have paid absent the unfair relationship
- Burden of proof: Where lenders cannot produce documentation to prove adequate disclosure, they must presume unfairness existed
- Timeline: Complaint handling deadline extension to 31 July 2026 for affected complaints; if the scheme proceeds, final rules expected early 2026 with compensation payments commencing later that year
- Industry impact: The FCA's data suggests 84% of scheme cases will involve DCAs, with the remainder concerning high commission or tied arrangements
Several major lenders have already begun setting aside provisions. Lloyds Banking Group announced an additional £800 million charge in early October, bringing its total motor finance provisions to over £1.2 billion. Industry sources suggest other retail banks with significant motor finance exposure are reviewing their balance sheets in light of the consultation.
"This scheme is a watershed moment for consumer credit regulation. The FCA is essentially applying principles-based regulation retrospectively to commercial practices that were widespread and, at the time, not clearly prohibited. Firms now face the prospect of unwinding nearly two decades of transactions."
Senior regulatory partner at a leading City law firm
IMPLICATIONS FOR ASSET MANAGERS: Beyond direct lenders, the scheme has material implications for asset managers that hold motor finance receivables through securitisations, CLO structures, or direct investments in consumer credit portfolios. Managers must assess:
- Exposure to affected vintages (2007-2021) across portfolio holdings
- Quality of origination practices and disclosure standards among underlying lenders
- Adequacy of representations and warranties in securitisation documentation
- Potential for redress claims to trigger early amortisation or credit enhancement breaches
- Valuation adjustments required for affected positions
The FCA has made clear that it expects lenders and brokers to act now, ahead of finalisation of the scheme. In its accompanying Dear CEO letter, the regulator set out specific expectations around complaint handling, resource allocation, and customer communications. Firms that fail to prepare adequately risk supervisory intervention.
Regulatory Updates
FCA Publishes Tokenisation Guidance to Drive Asset Management Innovation
ASSET MANAGEMENT, FINTECH
On 14 October, the FCA published consultation paper CP25/28 setting out proposals to support tokenisation of investment funds. The proposals form part of the regulator's digital assets roadmap and aim to make the UK a leading centre for fund tokenisation while maintaining investor protections.
Tokenisation-the representation of fund units or shares on distributed ledger technology (DLT)-can cut settlement times and improve transparency. However, existing FCA rules (particularly in COLL and the OEIC Regulations) were not drafted with blockchain technology in mind, creating uncertainty for firms considering tokenised structures.
- UK Blueprint model: Guidance clarifying how firms can operate tokenised fund registers under current FCA rules, including combining on-chain and off-chain records where full on-chain compliance isn't yet feasible
- Public blockchain access: Allowing authorised funds to use public blockchains (e.g., Ethereum), subject to appropriate risk management-a departure from the current private-blockchain-only approach
- Faster dealing: A new alternative dealing model allowing quicker, more flexible processing of unit purchases and redemptions, benefiting both traditional and tokenised funds
- Register requirements: Clarification that managers can meet unitholder register obligations through hybrid systems merging on- and off-chain data, provided these deliver complete, accurate records
- Stablecoin settlement: The FCA is seeking views on whether stablecoins (crypto assets pegged to fiat currency) should be permitted for fund settlement once the UK's stablecoin regime is operational
The consultation closes in early 2026, with final rules expected in the first half of that year. The FCA emphasised that whilst benefits may take time to materialise-as firms upgrade technology and processes-early clarity will enable investment now.
"Tokenisation has the potential to drive fundamental changes in asset management, with benefits for the industry and consumers. The UK has the opportunity to be a world-leader here and we want to provide asset managers with the clarity and confidence they need to deliver."
Simon Walls, Executive Director of Markets, FCA
The FCA noted that almost half (47%) of trading app users are aged 18-34, and these younger investors typically favour low-cost, fractionalised equity investments over traditional funds. Tokenisation could help asset managers reach these investors and update their operational infrastructure.
The FCA described the package as a targeted set of clarifications and amendments to remove barriers within the existing authorised fund regime, not a wholesale overhaul of fund regulation.
UK Lifts Retail Ban on Crypto ETNs
WEALTH MANAGEMENT, DIGITAL ASSETS
From 8 October, retail investors in the UK can access crypto exchange-traded notes (ETNs) listed on FCA-recognised exchanges, marking the end of a four-year prohibition. The FCA concluded that the digital asset market has matured sufficiently to permit retail access via regulated products, though its ban on crypto derivatives and direct crypto ETFs for retail investors remains in place.
Crypto ETNs are debt securities providing exposure to cryptocurrencies without investors directly holding the underlying assets. They trade on exchanges like equity securities, with the crypto held by regulated custodians. The move brings the UK closer to European markets where such products have been available for some time.
The government simultaneously confirmed favourable tax treatment: crypto ETNs can be held in registered pension schemes from 8 October 2025, and will be eligible for ISAs from April 2026, offering tax-efficient routes for retail investment. However, several major ISA platforms indicated they would need time to integrate crypto ETNs into their offerings, meaning widespread retail access may not be immediate.
Trading volumes on the London Stock Exchange for crypto ETNs remain modest-just 0.59% of European crypto ETP trading, averaging £624,000 daily compared to Europe's €26 billion in crypto ETN trading during 2024. Some industry commentators questioned whether the LSE has sufficient liquidity to support a functioning retail market, though proponents argue this will develop over time as awareness grows and more products list.
The ban on crypto ETFs and derivatives for retail investors stays in place because the FCA's current fund framework does not permit authorised funds to invest directly in cryptoassets. That framework would require legislative change-something the FCA indicated it may consider in future, but not as part of this immediate reform.
FCA Launches Open Finance Innovation Sprints
BANKING, FINTECH, WEALTH MANAGEMENT
The FCA on 13 October announced a partnership with technology providers to accelerate open finance delivery through a series of innovation sprints. Running from 17 November 2025 to 12 February 2026, two sprints will focus on high-priority use cases: mortgages and SME finance.
Open finance extends open banking principles beyond payments, enabling consumers to share a wider range of financial data-pensions, investments, insurance-with authorised third parties. Potential benefits include better credit decisions, more personalised advice and faster mortgage applications. However, building interoperable, secure data-sharing infrastructure at scale requires close collaboration between regulators, financial institutions, and technology firms.
The FCA is collaborating with Raidiam, which provides a testing environment allowing participating firms to simulate and test data sharing safely. This "Smart Data Accelerator" will help firms develop open finance solutions that meet regulatory standards for security and consumer protection. The FCA committed to publishing a full open finance roadmap by March 2026, supporting the government's National Payments Vision and ambition for the UK to lead globally in open finance.
Sprints are open for registration until 2 November, with firms, industry bodies, and technology providers encouraged to participate. The FCA views these sprints as a practical way to surface real-world challenges and co-develop solutions with the industry, rather than regulating in the abstract.
PRA Developments
Recent Policy Statements
The PRA has published the following policy statement in October 2025:
- PS16/25: MiFID Organisational Regulation
- Restates the organisational requirements for firms previously contained in the MiFID Org Reg into the PRA Rulebook, with no material changes
- The rules came into force on 23 October 2025, subject to revocation of the MiFID Org Reg
- Clarifies certain terms and updates cross-references to ensure consistency across the Rulebook
- Coordinated with the FCA's parallel transfer of MiFID Org Reg provisions (PS25/13) to ensure both regulators' rules take effect simultaneously
Bank of England Financial Policy Committee - October 2025
ALL FINANCIAL SERVICES
The FPC met on 2 October and published its record on 8 October. The Committee warned about market risks, particularly around artificial intelligence valuations and geopolitical uncertainties.
- Geopolitical and fragmentation risks remain elevated: Tensions associated with geopolitics, global trade and financial market fragmentation, and sovereign debt pressures remain material. The risk of sharp market correction has increased since June
- AI-driven equity valuations appear stretched: Measures of risk premia across many risky asset classes have tightened further despite persistent macroeconomic uncertainty. On several measures, equity valuations appear stretched, particularly for technology companies focused on AI. Combined with increasing concentration within market indices, this leaves markets exposed should expectations around AI's impact become less optimistic
- Spillover risks are material: A crystallisation of global risks could have material impact on the UK as an open economy and global financial centre, particularly given potential interactions with non-bank financial intermediary (NBFI) vulnerabilities
- Domestic resilience maintained: UK households and corporates remain resilient but continue adjusting to higher interest rates and living costs. The banking system has capacity to support the real economy even if conditions deteriorate substantially
- Countercyclical Capital Buffer held at 2%: The FPC maintained the UK CCyB rate at 2%, judging that current vulnerabilities and the overall risk environment do not warrant a change
The Committee noted that equity valuations based on past earnings are the most stretched since the dotcom bubble, though they look less extreme when based on expectations for future profits. The concentration of these bets within a narrow set of technology stocks amplifies potential volatility should sentiment shift.
"The risk of a sharp market correction has increased. A crystallisation of such global risks could have a material impact on the UK as an open economy and global financial centre." - Financial Policy Committee Record, October 2025
Systemic Risk Survey - H2 2025
The Bank published results from its Systemic Risk Survey on 8 October, covering responses from 59 participants (67% response rate) gathered between 28 July and 27 August. Headline findings included:
- Elevated geopolitical and trade fragmentation risks remain top concerns
- Market risks feature prominently, consistent with FPC's own assessment
- Respondents more confident in UK financial system stability compared to six months prior, though cognisant of external risks
- Cyberattacks and geopolitical factors viewed as primary threats
Bank of England Speeches
Several notable speeches were delivered in early October:
- Alan Taylor (MPC external member) - "Diversion ahead" (14 October): Addressed the "great rearrangement" of global trade driven by elevated U.S. tariffs, friend-shoring, and export restrictions.
- Catherine L. Mann (MPC) - "Explaining the consumption gap" (9 October): Focused on UK consumption dynamics and drivers behind the gap between expected and realised consumer spending
- Huw Pill (Chief Economist) - "Uncertainty, structural change and monetary policy strategy" (8 October): Examined how structural shifts and uncertainty inform the design and communication of UK monetary policy strategy
- Sasha Mills (Executive Director, FMI) - "From new ideas to new market structures" (8 October): Discussed innovation's path from concepts to market structures, and implications for resilience and supervision
- Andrew Bailey (Governor) - "Investment in Scotland" (6 October) and "Challenges to financial stability" (3 October)
Fund Launches & Capital Raises
Ecosystem Investment Partners Closes $400 Million Fund
PRIVATE EQUITY, IMPACT INVESTING
Ecosystem Investment Partners closed its latest fund at $400 million on 13 October, focused on environmental restoration and sustainable land management. The fund invests in impact strategies aiming for both financial returns and measurable environmental outcomes.
Golub Capital Launches $1 Billion GP-Led Secondary Initiative
PRIVATE CREDIT, SECONDARIES
Golub Capital announced on 10 October a $1 billion initiative to back GP-led secondary transactions, as general partners seek liquidity for ageing portfolio companies without traditional exits.
HarbourVest Partners Establishes Credit Secondaries Platform
PRIVATE CREDIT, SECONDARIES
HarbourVest Partners announced on 13 October a dedicated credit secondaries platform, targeting rising demand for secondary liquidity in private credit portfolios.
Brookfield Eyes $12.5 Billion for Seventh Flagship PE Fund
PRIVATE EQUITY
Brookfield is reportedly targeting $12.5 billion for its seventh flagship private equity fund, according to reports on 2 October.
CAZ Investments Commits $400 Million to Bonaccord Capital Partners
PRIVATE EQUITY
CAZ Investments announced on 9 October a $400 million commitment to Bonaccord Capital Partners.
Warburg Pincus to Acquire German Software Firm PSI for Over €700 Million
PRIVATE EQUITY, SOFTWARE
Warburg Pincus agreed on 13 October to acquire German software firm PSI for over €700 million.
Enforcement Watch
FCA Secures US$101 Million BlueCrest Redress
ASSET MANAGEMENT, HEDGE FUNDS
BlueCrest Capital Management reached a settlement with the FCA on 13 October, agreeing to pay US$101 million in redress to non-U.S. investors and withdrawing its planned Supreme Court appeal. The FCA, in turn, dropped a £40 million penalty and accepted significantly less redress than the $707 million originally sought.
The case centred on allegations that BlueCrest failed to manage a conflict of interest fairly when it transferred its most profitable trading strategies to an internal fund (BSMA) accessible only to firm principals, whilst external investors in the BlueCrest flagship funds received inferior performance from less sophisticated algorithms.
The settlement ends a case that began with FCA enforcement action in 2021. BlueCrest had successfully challenged aspects of the FCA's case at the Upper Tribunal, arguing the regulator lacked power to impose the original redress scheme. The Court of Appeal overturned that finding, leading to this negotiated outcome.
For asset managers, the case is a reminder of regulatory expectations around managing conflicts when proprietary and client capital sit within the same firm. The FCA pursued redress even after years of litigation and partial setbacks.
Daniel Pugh Sentenced to 7½ Years for £1.3 Million Ponzi Scheme
WEALTH MANAGEMENT, ENFORCEMENT
Daniel Pugh was sentenced on 6 October to seven and a half years' imprisonment following an FCA investigation into a £1.3 million Ponzi scheme. Pugh operated an unauthorised investment scheme, promising investors high returns whilst using new investor funds to pay fictitious returns to earlier participants-a classic Ponzi structure. The case shows the FCA's willingness to bring criminal prosecutions in cases of deliberate fraud.
Market Developments
St James Place Launches Low-Cost Passive Range Following Fee Overhaul
WEALTH MANAGEMENT, ASSET MANAGEMENT
St James Place launched a new passive multi-asset fund range on 8 October, its first purely index-tracking strategies. The Polaris Multi-Index range, priced at 0.20%, is a departure from SJP's historically active approach and follows the fee restructure it implemented in late August 2025.
The launch follows criticism of SJP's fee structure and comes as wealth managers face pressure on margins and closer FCA scrutiny of value for money. SJP's move toward passive strategies follows a wider industry trend, though the firm says active asset allocation by its investment team distinguishes the new range from pure passive offerings.
For asset managers and wealth platforms, SJP's move points to wider acceptance that passive strategies now need a prominent place in wealth management, particularly for cost-conscious clients and with regulators focused on value for money.
IMF Warns UK Risks Entrenched Inflation
ALL FINANCIAL SERVICES
The IMF's chief economist warned on 14 October that the Bank of England should be wary of lowering interest rates before inflation pressure shows clearer signs of easing. The BoE is likely to hold off further rate cuts until 2026, as inflation dynamics remain uncertain. It adds to concerns that UK inflation may prove stickier than expected, which would complicate rate cuts and keep borrowing costs high for businesses and households.
Trade Tensions and Market Volatility
ALL FINANCIAL SERVICES
Global trade tensions escalated sharply in mid-October, with renewed U.S.-China tariff threats triggering risk-off moves across markets. Crypto assets were particularly affected, with bitcoin falling 15% at its lowest point and record liquidations exceeding $19 billion as leveraged positions unwound. Equity markets also sold off, with the S&P 500 posting its worst day since April. The sell-off matched the FPC's warnings about the potential for sharp corrections.
How should asset managers with exposure to motor finance receivables through securitisations or consumer credit portfolios assess and communicate potential redress risks to investors, particularly where underlying documentation on origination practices may be incomplete?
Insight
The FCA's £11 billion car finance redress scheme rests on disclosure failures, not on proven economic harm. The FCA is treating procedural breaches alone as grounds for substantial compensation.
The regulator's own analysis estimated discretionary commission arrangements cost consumers £165 million annually (£2.3 billion over 14 years), yet the redress package is significantly higher.
The FCA appears to be compensating customers for the absence of informed consent rather than actual financial detriment. That approach - redress for transparency failures regardless of economic impact - could extend to other areas where similar disclosure issues exist.
The FCA is using standardised compensation - £700 per affected customer - rather than calculating actual harm, which sets a precedent for future redress.
Regulatory Calendar
October 2025
- 15 October: Deadline for responses to FCA discussion proposals on application of FCA Handbook to cryptoasset activities (CP25/25 chapters 6-7)
- 20 October: HM Treasury consultation closes on PSR integration into FCA
- 23 October: PRA and FCA rules from PS16/25 and PS25/13 (MiFID Org Regulation) come into force
November 2025
- 2 November: Registration deadline for FCA open finance innovation sprints
- 4 November: Deadline for responses to FCA consultation on extending motor finance complaint handling deadlines (CP25/27)
- 12 November: Deadline for responses to FCA consultation proposals on cryptoasset activities (CP25/25 chapters 1-5)
- 17 November: FCA open finance innovation sprints commence (running until 12 February 2026)
- 18 November: Deadline for responses to FCA consultation on motor finance consumer redress scheme (CP25/27)