UK/EU Investment Management Update (October 2025)

1. UK — FCA Market Watch Newsletters

2. UK — FCA General Updates

3. UK — Enforcement

4. UK — Artificial Intelligence (AI)

5. UK — Markets (T+1 Settlement)

6. UK — Cryptoassets

7. EU — ESMA 2026 Annual Work Programme

8. EU — ESG

9. EU — European Supervisory Authorities (ESAs)

10. EU — Markets in Crypto Assets Regulation (MiCA)

1. UK — FCA Market Watch Newsletters

FCA Market Watch 83 newsletter on corporate finance firms

On 8 September 2025, the FCA published Market Watch 83, its newsletter on market conduct and transaction reporting issues. The newsletter focussed on the FCA review of corporate finance firms’ systems and controls for handling inside information about their corporate clients, market soundings, and personal account dealing. In particular, the newsletter set out market practices and recommendations in relation to market soundings and marketing sounding recipients (MSRs) under the UK Market Abuse Regulation (UK MAR).

Although Market Watch 83 is focussed on corporate finance firms, many of the issues discussed are directly relevant to investment managers. Indeed, other than the bullet point “Ensure compliance with UK MAR and safe harbour” below, all of the points are equally important for investment managers.

• Management of MSR numbers. The FCA observed the Disclosing Market Participant (DMP) extend its market soundings to a relatively large number of MSRs without a proper process for considering the appropriateness or the number of MSRs contacted.
  
  The FCA encourages firms to consider whether their policies and procedures effectively manage the number of MSRs to control the flow of inside information. A good practice would involve a simple governance process for a senior staff member to review the proposed list of MSRs, to ensure that (i) firms sufficiently considered why each potential investor was included on the MSR list and (ii) that there was a clear justification for sharing inside information with such MSRs.

• Risk of unlawful disclosure of inside information. The FCA observed instances of DMPs inadvertently sharing information with individuals at the MSRs on large email chains without control over whether the recipients had been wall crossed by the gatekeeper. Further discussion on gatekeeper arrangements are detailed in our November 2023 Update.
  
  The FCA encourages both the DMPs and MSRs to consider and address the risk of unlawfully disclosing inside information through sharing market sounding information with individuals at the MSR that the gatekeeper has not wall crossed. Gatekeeper arrangements can be effective only if the list of approved recipients is strictly enforced.

• Standardising level of information shared with MSRs. The FCA observed inconsistent practices by DMPs in choosing the deal-specific information to share with the MSR. This is in breach of the UK MAR Technical Standard 2016/960 Article 3(5), which requires DMPs to ensure that all potential investors sounded receive the same level of information.
  
  The FCA encourages firms to implement policies and procedures to share a standard set of deal-specific information. A good practice would involve the DMP’s using an approved script for all market soundings to minimum differences in information sharing.

• Ensure compliance with UK MAR and safe harbour. The FCA observed practices where a broker (Broker A), after being appointed by the issuer to undertake market soundings for a transaction, asks another broker (Broker B) to market sound on its behalf. Under such arrangements, Broker B is conducting market soundings without the issuer’s knowledge and would not benefit from the safe harbour set out in Article 11(4) of UK MAR. This would put Broker B at risk of committing the unlawful disclosure of information offence under UK MAR.
  
  The FCA encourages firms participating in market soundings to assess on a case-by-case basis whether their disclosure are indeed lawful in accordance with the provisions of UK MAR.

• Systems and controls in smaller firms. The FCA observed that small firms have faced compliance risks that result from (i) overfamiliarity between compliance and the business, (ii) informal and unwritten policies and procedures, and (iii) weak information barriers among staff members.
  
  The FCA encourages smaller firms to carefully consider whether they have arrangements, policies, and procedures in place that are appropriate to their size to ensure regulatory compliance. A good practice would involve having well-documented and detailed policies and procedures accessible by the staff. It is also recommended to have structures that could exercise independent oversight, including a board, an internal committee, or an external compliance consultant.
  
  
• Personal account dealing (PAD). The FCA observed instances of PAD-related breaches including staff trading before receiving approval; insufficient compliance checks; and lack of follow-ups on PAD breaches. The FCA notes that in some cases, the breaches happened with consent of senior members of the business.
  
  The FCA stresses the importance of adhering to PAD policies and procedures in maintaining market integrity. Firms must implement adequate arrangements to manage these risks.

FCA Market Watch 84 newsletter on UK EMIR Refit reporting

On 30 September 2025, the FCA published Market Watch 84, which focuses on the UK onshored version of the European Market Infrastructure Regulation, which was amended via a Regulatory Fitness and Performance Program (UK EMIR Refit).

The newsletter evaluates the implementation of UK EMIR Refit one year after its introduction on 30 September 2024. UK EMIR Refit was introduced to improve derivatives reporting under UK EMIR and improve the quality of data reporting to trade repositories. For further information, please see our Update 2024 European Market Infrastructure Regulation Refit — Changes to the EMIR Reporting Regime.

Accordingly, the newsletter is relevant to firms with an obligation to report derivatives under the UK EMIR framework as counterparties. Moreover, the FCA observations may be instructive for firms subject to transaction reporting requirements under the UK Securities Financing Transaction Regulation (SFTR) and UK Markets in Financial Instruments Directive (MiFID).

Areas of improvement for effective implementation

As part of implementing UK EMIR Refit, reporting counterparties had to update details of outstanding derivative trades (entered into before 30 September) in line with new requirements by the end of the transition period on 31 March 2025. Although the majority of reports (95%) were “uplifted” to the new reporting requirements, the FCA notes that there remained a small population of “non-uplifted” reportable trades, causing the relevant counterparty to breach their reporting obligation.

The FCA identifies two main challenges that firms face in relation to implementing UK EMIR Refit:

• Inadequate resource planning. Some firms failed to allocate sufficient internal resources or suffered key person dependencies. The FCA highlights that firms should plan appropriate resources to change management activities to ensure they can meet regulatory obligations and deadlines, which includes implementing clear policies and procedures as well as effective change-related documentation.
• Overreliance on third-party vendors. The FCA observed instances of poor-quality reports submitted by vendors on behalf of counterparties. Despite these issues, the FCA underlines that the onus of data accuracy remains with the reporting counterparty, who must still ensure that any reports are complete and accurate. Firms must also notify the regulator of any material errors or omissions.

The FCA’s commentary on this area reinforces the regulator’s focus on improving transaction reporting, as highlighted in our December 2024 Update, in which we covered Market Watch 81’s observations on UK MiFID transaction reporting failures.

FCA expectations for filing breach notification

Since the UK EMIR Refit’s implementation, the FCA has received fewer breach notifications (267 notifications) than it has expected.

The FCA reminds firms that that the regulatory onus is on counterparties to determine when an identified breach is sufficiently material to require reporting. Accordingly, firms are expected to have effective systems and procedures in place to evaluate incidents and when a breach notification should be submitted. Notably, the FCA advises that if counterparties are uncertain about the materiality of a given error, they should notify the FCA.The FCA has also cautioned that now that the UK EMIR Refit implementation is complete, the regulator will be intensifying its scrutiny of the breach notifications, with a focus on timeliness, volume, and quality.

Regulatory priority on improving data quality

In terms of the future, the FCA expressed that its priority for the next 12 months is to improve overall data quality. The regulator intends to do so by focusing on reconciliation rates, closely monitoring breach notifications, increasing engagement with underperforming firms, and assessing counterparties’ systems and controls to ensure accurate reporting across both live and matured trades.

2. UK — FCA General Updates

FCA publishes Quarterly Consultation Paper

On 10 September 2025, the FCA published its 49th Quarterly Consultation Paper (CP25/24), which sets out proposed amendments to the FCA Handbook. Although the quarterly consultation papers tend to cover “minor” changes, this consultation covers a wide range of areas that may be relevant to investment managers.

Sustainability Disclosure Requirements

In the consultation, the FCA proposes “minor amendments” to the Environmental, Social, and Governance (ESG) Sourcebook. These changes only target rules relating to the UK’s sustainability labelling regime. For example, the FCA has proposed changes relating to the criteria on asset selection for products using a sustainability label and changes relating to the product-level sustainability reports that apply to firms using such labels.

As a reminder, the FCA Sustainability Disclosure Requirements and labelling regime is primarily retail investor-focussed and apply to UK alternative investment fund managers (AIFMs) and UK Undertakings for Collective Investment in Transferable Securities (UCITS) management companies. Accordingly, the rules (and the relevant proposals of this consultation) do not apply to non-UK firms marketing funds to investors under the UK Alternative Investment Fund Managers Directive (AIFMD) national private placement regime (UK NPPR) (such as U.S. or EU AIFMs).

MiFID Org Reg

The consultation also sets out changes to Perimeter Guidance manual (PERG) in connection with the restatement of the MiFID Organisational Regulation (MiFID Org Reg) (Commission Delegated Regulation (EU) 2017/565) into the FCA Handbook. The restatement of MiFID Org Reg is relevant for MiFID investment firms including (Collective Portfolio Management Investment firms), UCITS managers, AIFMs, MiFID optional exemption “Article 3” firms, third-country firms, and others.

As a reminder, the FCA had published consultation paper CP24/24 in November 2024 to consult on replacing firm-facing systems and conduct rules under the MiFID Org Reg with FCA Handbook rules (with no policy changes) when the HM Treasury commences the repeal of the MiFID Org Reg (see our December 2024 Update for further information).

In the current consultation, the FCA proposals on PERG relate to general drafting changes rather than policy changes:

• RAO amendments — changes to reflect amendments that have been made to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (RAO) that removed references to the MiFID Org Reg.
• PERG 13 — general drafting changes to focus the guidance’s legislative references on UK law rather than EU law. This includes explaining terms like “MiFID investment firm” as they are used in the FCA Handbook and the UK legislation that implemented MiFID, and removing old explanatory material relating how MiFID was “onshored” into UK legislation. Note, however, that PERG 13 will continue to include references to the corresponding provisions of EU legislation as these are helpful for firms.
  
  The proposed amendments are set out in draft instruments in the appendices to the Consultation Paper. The deadline for comments on the proposals is 15 October 2025.

FCA guidance on authorisation and registration applications

On 11 September 2025, the FCA published guidance on good practice and areas of improvements to help firms meeting FCA standards to become FCA-authorised or FCA-registered. The FCA sets out examples in relation to the following topics.

• Firms should have staff with the appropriate skills, experience, and capacity to provide the relevant financial service.
  
  In terms of good practice, the FCA notes that firms should be proactive in conducting their own suitability assessment and detailing their ownership structure for the easy identification of important personnel. Firms should also be up front with explaining their plans for staff resourcing and the rationale behind staff incentives.
  
  In terms of areas for improvement, the FCA observed that firms should avoid over-reliance on external consultants to understand their regulatory obligations. Additionally, firms should be able to explain how individuals with multiple responsibilities are able to allocate their time to competently fulfil their roles and should provide convincing evidence that the firm is committed to doing business and being based in the UK.

• Firms should have robust policies in place that document their processes and procedures and demonstrate how such systems and controls are appropriate for the business.
  
  In terms of good practice, the FCA notes that firms could make use of the FCA’s sample business plan, provide detailed analysis matching permission to intended analysis, and address the FCA’s Consumer Duty systematically in the firm policies and controls. Firms should also provide detailed analysis of how each permission applied for is relevant for the firm’s intended business activities. This can include providing their legal advice or referring to the FCA Perimeter Guidance Manual.
  
  In terms of areas for improvement, the FCA observed that firms should tailor their policies to their specific business, ensure they are customer-oriented, and avoid repeating FCA rules within their policies rather than detailing how the firm actually intends to comply with those rules
  
  
• Firms should have financial resources in place appropriate for the nature and scale of the business.
  
  In terms of good practice, the FCA notes that firms could provide fulsome evidence and explanations for their financial information and demonstrate their funding arrangements and contingency plans. The use of FCA financial templates is encouraged.
  In terms of areas for improvement, the FCA observed that firms should ensure the accuracy, completeness, and relevance of historic financial information submitted.
  

3. UK — Enforcement

Individual sentenced for investment fraud

On 5 September 2025, the FCA announced that John Burford had been sentenced to two years for defrauding over 100 investors out of £1 million. This decision follows from the FCA announcement that it had charged Burford on 15 April 2025.

Burford was found to have offered trade alerts and promoted investment opportunities in his self-named funds through self-published articles, blogs, and a book. In addition, Burford repeatedly misled investors about fund performance, concealed losses, and used the investor money to support his own lifestyle.

• Sections 19 and 23(1) of the Financial Services and Markets Act 2000, namely by accepting deposits and advising on and managing investments without FCA authorisation, which is punishable by a fine and/or up to two years’ imprisonment
• Section 993(1) of the Companies Act 2006, namely by carrying on the business for a fraudulent purpose and misleading investors as to the manner in which their money would be used, which is punishable by a fine and/or up to 10 years’ imprisonment.

The FCA highlighted in its press release specifically that fighting crime is central to its new strategy and that the regulator will take action against criminal behaviour that harms consumers and damages the integrity of our markets. The case follows other recent FCA enforcement actions on investor fraud, including the conviction of Daniel Pugh for a £1.3 million Ponzi scheme, as discussed in our September 2025 Update.

4. UK — Artificial Intelligence (AI)

FCA publishes approach to supporting adoption of AI in the UK’s financial markets

On 9 September 2025, the FCA published a webpage to outline its regulatory approach to AI and to collate other FCA publications on AI that had been released. The webpage points to existing frameworks that apply to the use of AI in the UK financial markets, such as the Consumer Duty and its rules relating to accountability for senior managers such as the Senior Managers and Certification Regime. Further, the FCA explains that it is working with domestic and international partners on AI as well as considering how AI can be used to improve the FCA’s own work as a regulator.

FCA summarises feedback on AI Live Testing

On 9 September 2025, the FCA published summarised feedback on its AI Live Testing, which enables firms to work directly with our regulatory and technical teams and get support for developing and deploying AI systems live in UK financial markets. This initiative forms part of the FCA AI Lab (see our November 2024 Update for further information). Accordingly, the feedback may be of interest for investment managers that are particularly interested in the FCA approach to AI more generally.

5. UK — Markets (T+1 Settlement)

FCA updates approach to supporting implementation of UK T+1 settlement

On 11 September 2025, the UK Accelerated Settlement Taskforce (AST) published an updated version of the UK T+1 implementation plan — the settlement of securities trades in one business day. As a reminder, the UK and EU will be moving to the T+1 settlement cycle on 11 October 2027.

The updates are generally limited to clarificatory changes, however, the AST includes an additional recommendation in relation to trade settlement in foreign exchange markets; the AST recommends that FX participants should work with custodians and providers to manage partial settlements and funding decisions to reduce settlement risk.

6. UK — Cryptoassets

FCA publishes consultation paper on the application of the FCA Handbook to regulated cryptoasset activities

In April 2025, HM Treasury published draft legislation to create new regulated activities relating to cryptoassets and stablecoins, such as dealing in cryptoassets as principal or agent and arranging deals in cryptoassets (see our May 2025 Update).

On 17 September 2025, the FCA published a consultation paper (CP25/25) including topics for discussion to consider how the FCA Handbook rules should apply to firms that will be carrying out such cryptoasset regulated activities. These proposals are intended to align cryptoasset firms with the standards expected of existing authorised firms and ensure that cryptoasset firms have the appropriate systems, controls, processes, financial resources, and people in place.

The proposals generally aim to apply “similar” requirements and guidance from the FCA Handbook to cryptoasset firms as to traditional financial firms, making certain changes where appropriate. This includes rules on conduct, governance (including the Senior Manager and Certification Regime), financial crime, and operational resilience.

The FCA clarified that where a firm must comply with stricter regulatory requirements based on its other authorised activities (e.g., regulated activities relating to traditional finance products), those stricter requirements will continue to apply at firm level, regardless of whether the firm obtains additional permissions to conduct cryptoasset regulated activities.

Separately, the FCA is also seeking feedback on the following topics for discussion: the application of the Consumer Duty; Conduct of Business and Product Intervention and Product Governance Sourcebooks; Dispute Resolution (DISP 1) and access to the Financial Ombudsman Service for cryptoasset firms.

In terms of timing, the FCA has asked for feedback on the discussion elements of its paper by 15 October 2025 and feedback on the consultation proposal elements by 12 November 2025. The FCA intends to publish finalised rules as Policy Statements in 2026.

7. EU — ESMA 2026 Annual Work Programme

ESMA publishes its 2026 Annual Work Programme

On 3 October 2025, the ESMA published its 2026 Annual Work Programme setting out its core policy and supervisory mandates and plans to promote more integrated, accessible, and innovative capital markets in the EU.

In relation to the investment management sector, ESMA set out the following key objectives and outputs for the 2026 year:

• ESMA will continue to contribute to the development of a single rulebook for the investment management sector by providing technical input to European co-legislators. It will continue to issue and review guidance and facilitate case discussions, workshops, common supervisory actions (CSA), and peer reviews to promote supervisory convergence across national competent authorities (NCAs) in relation to investment management.

• ESMA will continue to monitor risks in the investment management sector and notes it will likely focus on the following key areas: use of leverage by funds, liquidity, and the interconnectedness of funds with the rest of the financial system.
• In relation to the AIFMD and UCITS Directive, ESMA will develop guidelines for NCAs on the activation of suspensions of subscriptions and redemptions of funds and other NCAs powers (due in Q2 2026).
• In relation to the European Commission assessment of the Packaged Retail and Insurance-based Investment Products (PRIIPs) Regulation (Regulation (EU) No 1286/2014) and SFDR, ESMA notes such developments may give rise to regulatory technical standards (RTS) and requests for technical advice from the ESAs to advance the simplification of the legislative frameworks and reduction of burden for financial market participants.
• ESMA will produce a final report, “2025 CSA on Compliance and Internal Audit Functions of UCITS Management Companies and Alternative Investment Fund Managers” (due in Q2 2026).
• ESMA will also finalise its project “Tackling greenwashing risk in the sustainable investment fund market” as part of the European Commission 2024 Technical Support Instrument (due in Q4 2026).

8. EU — ESG

ESAs publish latest report on PAI disclosures

On 9 September 2025, the ESAs published their fourth annual report on PAI disclosures (both entity-level and product-level disclosures) under the EU Sustainable Finance Disclosure Regulation. The annual report relates to PAI disclosures published by 30 June 2025, covering the 1 January – 31 December 2023 reference period. The ESAs relied on (i) surveying NCAs for input, (ii) assessing 91 publicly available entity-level statements, and (iii) assessing some investment funds’ product-level PAI statements, based on data obtained via Morningstar.

Findings on PAI disclosure

In summary, the annual report observed a general improvement in PAI disclosures. Overall, financial market participants (FMPs) (i.e., entities subject to the SFDR) demonstrated more effort to publish complete information in compliance with SFDR requirements and improved the quality of information provided.

The annual report also reported the following data points, which may be of interest to investment managers:

• Entity-level PAI disclosures. Of 1,135 FMPs in the asset management industry (i.e., asset management firms) that were subject to the obligation to consider PAIs (but not necessarily disclose PAIs), 615 firms (c. 54%) have not disclosed PAIs, 114 firms (c. 10%) disclosed PAIs because they were subject to mandatory disclosure, while 406 firms (c. 36%) voluntarily disclosed (i.e., even though they were not subject to mandatory disclosure).
  
  Note, however, that this sample size is based on the ESAs’ survey of NCAs and the NCAs’ own sample selection, which may not represent all entities in scope of the SFDR in the EU.
• Product-level PAI disclosures. 10,214 of 11,454 (c. 89%) of Article 8 funds consider PAIs, whereas 943 out of 970 (c. 97%) of Article 9 funds consider PAIs.

Areas for improvement

The ESAs also identified certain areas for improvement, which are summarised below.

• Entity-level disclosures — general. Generally speaking, disclosures should have a clearer explanation and quantification of actions planned and taken and have clearer targets for the next reference period.
• Entity-level disclosures — accessibility. Although most entity-level PAI statements were easy to find on FMP websites, in some cases they required substantial navigation or had old hyperlinks that were no longer functional.
• Entity-level disclosures — non-consideration of PAI statements. The quality of statements of non-consideration of PAIs are not satisfactory. The ESAs criticised the reliance of FMPs on explanations such as limited resources and data availability without providing any forward-looking approach, nor any indication about when the consideration of PAI indicators would be introduced. Moreover, they found that the explanations were generic, relied on standard language, and were used repeatedly year after year without reflecting the entity’s investment approach.
• Product-level disclosures. Although the ESAs note that supervision of product-level PAI disclosures are particularly challenging (there are no processes for FMPs to communicate product-level PAI information to national competent authorities), the annual report noted that some FMPs did not make a clear distinction between product-level PAI disclosures and entity-level PAI disclosures.

Recommendations

The ESAs have invited the European Commission to take the annual report’s findings into account in the context of the European Commission’s wider review of the SFDR framework (known as SFDR 2.0). In particular, the ESAs set out four key recommendations:

1. The European Commission should consider the “persisting value of PAI statements,” possibly in a shorter form and with reduced indicators, and with statements presented in a machine-readable format.
2. Given that the annual report observed a lack of data coverage, the European Commission should consider allowing FMPs to disclose the proportion of investments covered by data and distinguish that from the proportion that is estimated. This would enable investors to come to their own conclusions to assess the robustness of the disclosures.
3. The European Commission could consider a different means of ensuring proportionality for FMPs, as the “500 employee” threshold for requiring entity-level PAI disclosures may not be meaningful. For example, an alternative approach to disclosing on the adverse impact of FMPs could include establishing a threshold based on the total amount of the FMP’s investments (e.g., an assets-under-management threshold).
4. The European Commission should lower the frequency of reports required from ESAs on PAI disclosures from publishing annually to publishing every two or three years. This would allow the ESAs and NCAs to provide a more meaningful analysis of PAI disclosures.

European Commission produces guidance on the application of the EU sustainable finance framework to the defense sector

On 15 September 2025, the European Commission circulated a notice to provide guidance on the applicability of the EU sustainable finance framework to the defence sector.

The notice, dated 28 August 2025, is directed at all types of market operators, including investors, public authorities, FMPs (i.e., entities subject to the SFDR), and ESG rating providers. In addition, the notice explains that it covers the following laws by reference to the EU sustainable finance framework: (i) SFDR, (ii) MiFID II, (iii) the EU Taxonomy, (iv) the Corporate Sustainability Reporting Directive (CSRD), (v) Benchmarks Regulation, and (vi) the Corporate Sustainability Due Diligence Directive.

The European Commission clarifies that the EU sustainable finance framework is compatible with investing in the defence sector and that the sustainability disclosure applies horizontally across all industries. Notably, the notice highlights that the sustainability finance framework “sets no limitations on the financing of any sector, including the defence sector, and encourages defence sector investments, like those in any other sector, to be assessed on a case-by-case basis.” This is because the defence sector is also subject to the general expectation to become more sustainable from an ESG perspective.

The notice also provides additional guidance specific to each legal framework. The key points for investment managers are summarised below.

• SFDR. For FMPs that consider PAI (whether on a product-level or entity-level basis) and wish to invest in the defence industry, the PAI indicator 14 (“Share of investments in investee companies involved in the manufacture or selling of controversial weapons”) will be relevant.
  
  The European Commission reminds that the PAI indicator only relates to exposure to four categories of controversial weapons: anti-personnel mines, cluster munitions, chemical weapons, and biological weapons. The definition of controversial weapons listed in the SFDR does not cover nuclear weapons.
• EU Taxonomy. The European Commission notes that undertakings involved in the defence sector can, like other sectors, claim Taxonomy alignment, such as investments in greening their buildings and infrastructure or investment in clean transport, data solutions or manufacturing, etc.
• MiFID II. The framework contains requirements for investment firms to consider clients’ sustainability preference, which can include consideration of PAI. The European Commission underlines that no provision prescribes investment firms to consider that defence sector investments have adverse effects, simply for the sole reason of being invested in that sector, and therefore should not be offered to clients with sustainability preferences. 

ESMA publishes letter to European Financial Reporting Advisory Group (EFRAG) on the consultation of the revised ESRS

On 1 October 2025, ESMA published a letter in response to the EFRAG’s public consultation on the exposure drafts of the revised ESRS that set out the reporting standards under the CSRD. Overall, ESMA expressed its support of efforts towards simplifying requirements, improving readability, and reducing the compliance burden for companies that fall in scope of the CSRD reporting obligations. However, ESMA also provided a number of recommendations, which may be taken into account for the direction of the revised ESRS. Certain key points are summarised below.

• Concept of materiality. The exposure drafts propose two different notions of materiality: one for “primary users” (e.g., investors) and another for general sustainability users. ESMA warns that this could cause divergence and confusion and suggests that the ESRS retain only a single core notion of materiality.
• IROs vs topics. The exposure drafts currently lean more on reporting by “topics” rather than directly on impacts, risks, and opportunities (IROs). ESMA cautions that this approach risks obscuring how material IROs are managed, and the drafts should remain clear in disclosures.
• Reliefs and phase-ins. The exposure drafts introduce broad reliefs (e.g., indefinite application of “undue cost or effort” reliefs). ESMA warns that these could weaken the drive for high-quality reporting and invites more targeted, time-limited reliefs.
• Transition strategy disclosures. ESMA argues that the ESRS must preserve strong transparency on transition strategies and clarify what qualifies as a credible transition plan. ESMA stresses that it is critical to retain quantitative disclosures for anticipated financial effects (not only qualitative) where feasible, especially for climate risks.
• Interoperability with ISSB. ESMA cautioned that some proposed amendments may reduce interoperability, for example, weakening quantitative requirements on anticipated financial effects may reduce comparability among the standards. Accordingly, ESMA recommended that the revised ESRS do not diverge unnecessarily from International Sustainability Standards Board (ISSB) standards.

9. EU — European Supervisory Authorities (ESAs)

ESAs publish latest report on risk and vulnerabilities in the EU financial system

On 19 September 2025, the ESAs published their Autumn 2025 Joint Committee Report on risk and vulnerabilities in the EU financial system. The report notes that deepening geopolitical uncertainties from the increasing tensions in global trade and the global security architecture have affected the financial risk landscape. For example, tariff controls and currency policies have an ongoing impact on commodities and foreign exchange markets, which carries a ripple effect on European financial institutions.

Against this background, the ESAs advise financial market participants, such as national supervisors, financial institutions, and market participants, to take effective actions to counteract such risks and uncertainties, including these:

• embedding geopolitical risks in the day-to-day business operations and risk assessments, due to the EU’s high dependence on non-EU market infrastructure and service providers;
• ensuring risk management capacities address both short- and medium-term challenges, for example by utilising stress testing and scenario analysis tools;
• dedicating adequate resources to assessing cyber risks and management to mitigate the impact of cyber-attacks on operational and financial stability; and
• increasing monitoring on the risks arising from the crypto market as it becomes more interlinked with the traditional financial sectors.
  

10. EU — Markets in Crypto Assets Regulation (MiCA)

ESMA publishes compliance tables relating to ESMA Guidelines on MiCA

On 25 September 2025, ESMA published three compliance tables showing which of the EU NCAs comply, or intend to comply, with the following guidelines relating to MiCA.

• Compliance table in relation to ESMA Guidelines on the procedures and policies, including the rights of clients, in the context of transfer services for cryptoassets under MiCA on investor protection.
• Compliance table in relation to ESMA Guidelines on situations in which a third-country firm is deemed to solicit clients established or situated in the EU and the supervision practices to detect and prevent circumvention of the reverse solicitation exemption under MiCA.
• Compliance table in relation to ESMA Guidelines on certain aspects of the suitability requirements and format of the periodic statement for portfolio management activities under MiCA.