U.K.
Funds and financial products
In 2024, significant progress was made regarding the U.K.’s overseas fund regime (OFR) for retail investment funds and money market funds, with HMT and the FCA jointly issuing a “roadmap” on 1 May 2024 setting out expected timings for future milestones. In 2025, it is expected that the government will lay any legislation required to implement decisions on the applicable of SDR and labelling for OFR funds, followed by an FCA consultation on related rules and guidance. Looking further ahead, the final landing slot closes for non-MMF TMPR schemes in September 2026, and in December 2026, the TMPR for non-MMF schemes is due to come to an end (although the government can choose to extend the TMPR).
Other significant progress in 2024 included the development of the Consumer Composite Investments (CCI) regime, to replace the existing U.K. PRIIPs regime. The U.K. government deemed the PRIIPs regime as not fit for purpose and, as part of the Edinburgh Reforms, proposed to repeal it as a matter of priority. The Consumer Composite Investments (CCI) (Designated Activities) Regulations 2024 were made in November 2024 (for more on the designated activities regime, please see commentary under the heading The Designated Activities Regime in the Cross-sector section above). These serve as a framework to underpin the CCI regime, the detail of which will be set out in the FCA Handbook.
On 19 December 2024 the FCA published consultation CP 24/30 (A new product information framework for CCIs). Products formerly under the PRIIPs regime and UCITS disclosure requirements, including overseas funds in the Overseas Funds Regime (OFR), will now fall under the umbrella of CCIs. The CCI regime will apply not only to U.K. authorised and unauthorized manufacturers and distributors of CCIs but also to firms operating overseas that manufacture or distribute in-scope products (CCIs) to retail investors in the U.K.
The FCA will publish a further consultation with draft rules for consequential amendments and transitional provisions in early 2025, and plans to issue a policy statement with final rules in 2025 with the new regime coming into force when the policy statement is published, or shortly afterwards, but with a substantial transitional period. In the consultation, the FCA propose that existing PRIIPs KIDs or UCITS KIIDs or equivalent disclosure produced and communicated in line with current obligations will be considered compliant until the end of an 18-month transition period, running from the date the policy statement and final rules are published (12 months for certain close-ended investment companies currently subject to an exemption from U.K. PRIIPs). The timing for and extent of changes needed to existing disclosures (including legends and selling restrictions), will depend on the outcome of the above consultations.
On U.K. AIFMD, the FCA consultation expected in 2024 has been delayed and so this may now be published in 2025. The FCA had previously confirmed that there would be a consultation on amending the AIFMD regime in the U.K., and re-evaluating the AIFMD rules for non-UCITS retail funds in Q3 2024.
In the context of asset management more broadly, the FCA has indicated that in light of the M&A activity seen in the market in the last two years, it is planning a multi-firm review of consolidation activity in the market. As mentioned below in the discussion of the FCA’s new strategy for investment advisers and intermediaries (under the Treatment of consumers heading), one of the three pillars of the FCA’s new strategy for advisers is consolidation. In the FCA’s Dear CEO letter regarding the new strategy, the FCA gives guidance on its expectations, including on the delivery of “good outcomes”, and refers to some historic guidance in this space. Please see further below on the FCA’s intended focus in 2025 on investment advice for retail customers.
Consumer credit
A headline topic of 2024, which will continue to be an area of regulatory focus in 2025, is motor finance commission. Key developments are expected in 2025 in terms of the FCA’s enforcement and ongoing work in this space (including the pause of the 8-week deadline for motor finance firms to provide a final response to complaints), the approach of the FOS (in particular the High Court’s recent finding in favour of the FOS regarding its upholding of a complaint in relation to discretionary commission under a motor finance agreement), and the U.K. courts’ other judgments on motor finance commission.
This will be an important topic for lenders and brokers to monitor in respect of any consumer-facing commission arrangements both for motor finance agreements, and more broadly—as there may be read-across to other types of consumer credit business. In terms of key dates for the year ahead for firms, it is worth noting the FCA’s extension of time for firms to have to respond to complaints (the most recent extension of the deadline being to 4 December 2025), the expected Supreme Court heading of the appeals in respect of the recent Court of Appeal judgment (which will be in Hilary Term, 2025) and the outcome of the FCA’s review of historical motor finance commission arrangements and sales (with next steps currently expected to be confirmed in May 2025).
Also, of particular note, in 2024 the FCA published its review of consumer credit firms and other non-bank lenders, and its strategy for Retail Banks in 2025.
In the review, the FCA split its observations between those firms it classified as consumer credit firms (those offering credit including premium finance, finance for goods and services and student loans) and non-bank mortgage lenders (typically those offering second charge loans and buy-to-let mortgages). As one might expect given the secured nature of the facilities, the non-bank mortgage lenders appear to be better positioned but the overall message is that the majority of lenders could improve their approach to risk governance and risk management. The FCA’s strategy for Retail Banks in 2025 confirms that priorities will include compliance with the Consumer Duty and the treatment of customers in financial difficulty.
On the U.K.’s proposed reform of the Consumer Credit Act 1974, no set timeline for further developments has been confirmed. A further consultation on proposals for reform was expected in 2024, however this was not published. Please refer to the Payment services and payment systems section for discussion of the new regulated treatment of BNPL.
Treatment of consumers
The regulated activity of investment advice provided to the retail market remains in the spotlight and is expected to continue to be an area of regulatory scrutiny. In Q4 2024, the FCA published various materials and announcements, including a Dear CEO letter, on the new strategy for investment advisers and intermediaries. The new strategy is described as having three buckets, or pillars—reducing and preventing serious harm, testing and monitoring standards under the Consumer Duty, and the Advice Guidance Boundary Review.
This first pillar has four focus topics: (i) retirement income advice; (ii) ongoing advice services; (iii) ensuring the polluter pays; and (iv) consolidation. An additional point of interest for firms is that the FCA intends to publish the Investment Advice Assessment Tool, which it currently uses internally to assess investment advice. Please also see comments on the Consumer Duty below.
Alongside the pursuit of this new strategy, in November 2024 the FCA set out its next steps on the Advice Guidance Boundary Review. Initially the focus will be on retirement income, and the FCA has published a consultation paper on high level proposals relevant to this aspect of the Advice Guidance Boundary Review (in December 2024). By the end of H1 2025, the FCA plans to consult on rules for better support for consumers in retail investments and pensions.
Throughout 2024, the FCA carried out substantive work in relation to the Consumer Duty, and it is expected that this focus will continue into 2025. Publications of particular interest include indications of good and poor practice for the price and value outcome and, notably, the call for input in relation to the Consumer Duty, where the FCA will review requirements and identify areas where co-existing and potentially duplicative or conflicting rules and guidance can be usefully amended. In addition, the FCA published the findings of its thematic review into firms’ approaches to complaints and root cause analysis in December 2024, to support effective embedding and implementation of the Consumer Duty. Overall, the FCA found that firms have established processes for carrying out root cause analysis of complaints, identifying trends and themes, and that most firms could evidence clear escalation routes and accountability. Finally, in Q1 2025, a review of firms’ treatment of customers in vulnerable circumstances by the FCA is expected.
EU
Funds and financial products
One of the headlines of 2024 was the publication of AIFMD II, which entered into force on 15 April 2024 and must be implemented by Member States by 16 April 2026. There are a number of changes made to AIFMD by the amending directive, but the new rules for loan originating funds have attracted particular industry attention. The new regime comprises two sets of rules—one which only applies to AIFs falling within the new definition of “loan originating AIF” and the other being relevant for all AIFs that originate loans, irrespective of whether loan origination is their main strategy or not (although existing AIFs originating loans may benefit from certain exemptions and/or a grandfathering period until April 2029). ESMA has launched its consultation on draft regulatory technical standards on open-ended loan-originating AIFs, which are intended to be finalised by Q3 or Q4 2025. AIFMD II also makes amendments to UCITS legislation, and, over the course of 2025, ESMA expects to develop regulatory technical standards and guidelines on liquidity management tools for both AIFs and UCITS. Separately, ESMA also expects to publish its technical advice on UCITS eligible assets.
The focus on loan origination in the AIFMD review, which led to the AIFMD II amendments, marks a potential move towards certainty for private credit in the EU. A stated purpose of the AIFMD II amendments is to establish an efficient internal market for loan origination by AIFs, recognising the right of AIFs to originate loans and the importance of facilitating access to finance as an objective of the EU’s Capital Markets Union action plan.
Private credit, together with other non-bank financial intermediaries, has been a particular area of recent regulatory scrutiny in the EU and more widely, and has been considered extensively by various analyses carried out on the financial resilience of the U.K., EU and global financial systems.
In May 2023, the European Commission issued a legislative proposal for a regulation to amend the EU PRIIPs Regulation (the Proposed Amending Regulation) as part of the EU Retail Investment Strategy aimed at strengthening retail investor protection. A key overall objective of this strategy is to encourage participation in EU capital markets (which has historically seen lower investment levels than the US), and in turn, to stimulate economic growth and fund the EU’s net zero goal. Subsequent to this, the EU Parliament agreed its negotiating mandate for trialogue in March 2024, whilst the EU Council agreed its negotiating position in June 2024. The Proposed Amending Regulation makes targeted amendments to the PRIIPs Regulation whilst keeping the main provisions intact and is listed as a legislative priority by the EU Parliament, the Council and the Commission in their July 2024 Joint Declaration.
Whilst it remains to be seen how the differing positions of the EU Commission, EU Parliament and EU Council will be resolved in trialogue, proposed changes include the addition of a new section in the KID entitled “How [environmentally] sustainable is this product?” Clarifications have also been suggested to the scope of the regulation, requirements for revisions of the KID, as well as proposed changes to certain content and format requirements (for example, in relation to performance information, the addition of a new “Product at a glance” dashboard and removal of the comprehension alert and the development of an independent online comparison tool, based on KID data available under the European Single Access Point).
The proposed changes are with an eye to strengthening retail investor protection and the proposed provision of the KID in electronic format by means of an interactive tool. The application date of the Proposed Amending Regulation is subject to debate, but once the final text has been agreed in trialogue, it is unlikely to apply for 18-24 months after entry into force of the Proposed Amending Regulation (likely end 2026 at the earliest).
Consumer credit
A key date for the year ahead in terms of consumer credit in the EU is the deadline of 20 November 2025, by which Member States must have adopted and published the laws, regulations and administrative provisions necessary to implement Directive 2023/225 on credit agreements for consumers and repealing the CCD 2008 (CCD II). CCD II makes a number of upgrades and changes to existing consumer credit legislation in the EU; notably, it brings certain “Buy-Now, Pay-Later” (BNPL) products in scope. Please also see the Payment services and payment systems section above on the new rules for the regulation of BNPL in the U.K.
Treatment of consumers
The EU Retail Investment Strategy will continue to be a driving force for developments in EU markets over the course of 2025. The changes will impact MiFID, IDD, UCITS, AIFMD and Solvency II by way of an omnibus directive, and changes to PRIIPs regulation (which is covered separately—please see above). In 2024, both the Parliament and the Council published their negotiating positions and therefore in 2025 it is expected that there will be progress through the negotiation phase towards finalised texts. There are a number of proposals which are the subject of much debate, in particular the potential changes to the rules on inducements, which has been controversial. For U.K. firms with EU business interests, there is clear overlap between the EU RIS proposals and the U.K.’s Consumer Duty (see above in the U.K. section under the Treatment of consumers heading), the new U.K. retail disclosure regime (which will replace PRIIPs regulation) and changes to payment optionality for inducements, meaning firms may need to keep an eye on continuing divergence and, possibly, re-convergence.
More broadly on consumer legislation, in 2025 the EU Accessibility Directive will come into force on 28 June. The directive applies very broadly to various services and products, but for financial service regulatory firms, it covers (in particular) “consumer banking services”, meaning certain MiFID, credit and payment services provided to individuals acting outside their trade/ profession and (in terms of related products) ATMs and payment terminals.
Service and product providers have to comply with accessibility requirements to maximise foreseeable use for persons with disabilities, including ensuring accessibility of products used to provide the service, and providing information about the service in an accessible way. Key issues that firms will be navigating in 2025 include looking at how far the scope impacts their services and products (including websites, mobile apps and customer service channels) and how to reconcile the Directive’s requirement to provide information in an understandable way when products and service may already be subject to pre-existing prescriptive information disclosure requirements.
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