UK/EU Investment Management Update (February 2026)

In this Sidley Update, we cover, on the UK side, the first edition of the Enforcement Watch from the Financial Conduct Authority (FCA), an enforcement action on insider trading, FCA updates on the Berne Financial Services Agreement and the new Firm Checker tool, a private markets report from a House of Lords Committee, FCA webpage updates on cryptoasset and T+1 settlement, and FCA consultation papers on cryptoasset regulation and UK Sustainability Reporting standards. We also cover a Bank of England speech on the UK’s digital financial future, the Treasury Committee’s report on artificial intelligence risks in the financial services, and the UK-EU cooperation on supervising third-party service providers.

On the EU side, we review the thematic note on sustainability-related claims from the European Securities and Markets Authority (ESMA), the Taxonomy Simplification Delegated Act, and the European Commission’s consultation on venture and growth capital funds reform. We also cover ESMA’s 2027–29 programme and principles on risk-based supervision, and the Financial Stability Board work programme for 2026.

1. UK — Enforcement

2. UK — FCA

3. UK — Private Markets

4. UK — Cryptoassets / Fintech

5. UK — AI

6. UK/EU — Critical Third-Party Service Providers

7. UK — ESG

8. UK — Markets (T+1 Settlement)

9. EU — ESG

10. EU — AIFMD and EuVECA

11. EU — ESMA

12. International — Financial Stability Board

1. UK — Enforcement

The FCA publishes its first edition of the new Enforcement Watch

On 28 January 2026, the Financial Conduct Authority (FCA) published the first edition of its new Enforcement Watch, covering updated publicity policy in action, enforcement case priorities, and international partnerships. This follows from the FCA’s publication of the updated Enforcement Guide, covered in our September 2025 Update.

The updated publicity policy follows the “exceptional circumstances” test, as recently discussed in our December 2025 Update. This means that when opening a case, the FCA will always consider whether to announce and revisit this case during the investigation process. The FCA considers the potential prejudicial effect on the persons that are, or are likely to be, subjects of the investigation.

The FCA disclosed that between 3 June and 31 December 2025, the FCA opened 23 enforcement operations. We have summarised the key observations from the Enforcement Watch in relation to those operations:

• Subject of enforcement. Six were focused on individuals, and none met the bar to be announced. Two were focused on unauthorised business activity and were not announced based on operational reasons, although that decision is still under review. Twelve were opened into authorised firms, and only one firm was announced publicly, for which the primary consideration was consumer protection. The remaining operations related to listed issuers and insurers.
• Wide range of misconduct topics and offences. Eighteen focused on regulatory breaches, four on criminal and regulatory offences, and only one is a criminal offence investigation. The list of investigations includes the following topics: individual responsibility; listed issuers; unauthorised business; fair value; inadequate oversight; adequacy of controls; and consumer investment and asset management.

The FCA highlights that before it initiates enforcement actions, it adopts a supervisory approach that affords the firm in question an opportunity to do the right thing. The following factors may prompt the FCA to consider applying its enforcement tools: (i) repeated failure to be transparent with FCA inquiries; (ii) lack of prompt remedial actions in response to FCA concerns; (iii) deliberate misleading of the FCA, consumers, or the markets; and (iv) actions of fraud, severe disruption to services, and misappropriation of assets that result in significant harm to consumers.

Finally, the FCA highlighted its continued cooperation with international law enforcement agencies and regulators. In particular, the regulator utilises information around the world to support its cases and operations, including witness statements, banking records, and transaction data. The FCA stressed that international collaboration is key given that bad actors and platform providers are often based outside of the UK. Accordingly, the FCA will continue to support cross-border collaboration to tackle global issues.

The FCA fines oil consultant for insider trading

On 16 January 2026, the FCA announced that it had fined Russel Gerrity c. £310,000 for insider trading. Gerrity had worked as an oil rig consultant for an oil and gas drilling project and traded shares in Chariot Oil & Gas Limited shares and Eco (Atlantic) Oil and Gas Plc whilst in possession of inside information on the companies. On four separate occasions between the period from October 2018 to January 2022, Gerrity took advantage of inside information to gain and avoid losses through illicit trading, by buying or selling shares before the public announcements were released for a net gain of c. £129,000.

The FCA was informed of Gerrity’s trading through Suspicious Transaction and Order Reports (STORs) submitted by an unidentified firm. Subsequently, the FCA’s own systems traced further suspicious trades from Gerrity, who used multiple accounts with different brokers while he was outside of the UK. The FCA found that Gerrity’s actions breached the prohibition on insider dealing under Article 14(a) of the UK Market Abuse Regulation.

The FCA fines two individuals for insider trading

On 10 February 2026, the FCA announced that it had fined two individuals for insider dealing, imposing financial penalties totalling c. £109,000, in relation to trading in shares of Bidstack Group Plc, a London Stock Exchange Alternative Investment Market-listed advertising technology company.

The FCA found that Bhavesh Hirani, who was serving as Bidstack’s interim Chief Financial Officer in December 2021, had access to inside information concerning a material and unpublished commercial agreement with a major video game publisher. Prior to the public announcement of that agreement, Mr Hirani unlawfully disclosed the information to an associate, Dipesh Kerai, and facilitated the purchase of Bidstack shares through an account in Mr Kerai’s name.

The FCA was informed of the trading through STORs submitted by an unidentified firm. The FCA concluded that both individuals’ conduct breached Article 14 of the UK Market Abuse Regulation in relation to insider dealing and unlawful disclosure of inside information. In addition, Mr Kerai has been required to return the £9,000 profit generated from the shares. Mr Hirani was fined c. £56,000 and Mr Kerai c. £53,000, with both penalties reflecting settlement discounts for early resolution.

The cases of Mr Hirani and Mr Kerai, as well as Mr Gerrity above, underscore the regulator’s continued focus on insider dealing and the importance of effective internal controls, personal account dealing restrictions, and the timely submission of STORs.

2. UK — FCA

The FCA announces that the Berne Financial Services Agreement has gone live

On 29 January 2026, the FCA announced that the Berne Financial Services Agreement (BFSA) took effect on 1 January 2026. The BFSA is an agreement between the UK and Switzerland that allows firms to carry out specified wholesale activities on a cross-border basis between the two countries. The FCA confirmed that the first notifications have been successfully received from both UK and Swiss firms and that the respective regulators are reviewing the notifications before the firms are added to host authority registers. For further information on the BFSA, see our December 2025 Update.

The FCA invites firms to engage with the FCA Firm Checker tool

On 29 January 2026, the FCA published its regulation round-up for January 2026 and called for firms to provide links to the firm’s profile on the FCA Firm Checker rather than the FCA Register on consumer-facing webpages. The FCA Firm Checker webtool is designed to help consumers quickly identify whether a financial services firm is authorised and has the relevant permissions to provide services. However, the FCA confirms that the FCA Register remains in place as the full regulatory record of authorised financial services firms and individuals.

3. UK — Private Markets

House of Lords Financial Services Regulation Committee publishes report on private markets

On 9 January 2026, the UK House of Lords Financial Services Regulation Committee (the Committee) published a report on private markets. The Committee’s inquiry into private markets has been prompted by the rapid growth of the global private markets, their interconnectedness with banks and insurers, and the potential implications for the UK’s financial stability. Key conclusions and recommendations:

• Governance and oversight expectations. The report observed that HM Treasury (HMT) evidence with the Committee demonstrated a “limited grasp” of the concerns raised in the inquiry and indicates a passive approach on the government’s part. Accordingly, the report urges the government, the Bank of England (BOE), the FCA, and the Prudential Regulation Authority (PRA) to continue proactive monitoring of private markets and ensure they have appropriate powers and information to understand and monitor private markets.
• Data gaps and transparency issues. The Committee noted that it could not obtain comprehensive data on the size, growth, interconnections, and lending activities of private markets in the UK. It urges policymakers and regulators to improve the collection and analysis of data on private funds to address such gaps. For investment managers, this may mean increased regulatory scrutiny on private funds, such as data reporting, transparency of valuations, and interconnected risks.
• Systemic risk uncertainty. Whilst the Committee has not received conclusive evidence on whether private markets represent a systemic risk, they remain systemically relevant. The Committee encourages the BOE to complete its “System Wide Exploratory Scenario” exercise with urgency to determine whether private credit and private equity in the UK are systemic and its implications on the UK financial stability. The BOE expects to share the results next year.

4. UK — Cryptoassets / Fintech

FCA cryptoasset webpages, application period, and gateway

On 8 January 2026, the FCA published a series of webpages in relation with the new regulatory regime for cryptoassets, due to come in force on 25 October 2027. For more information on the new regulatory regime, please refer to our January 2026 Update and our update titled UK Cryptoasset Regulation — Action Points for 2026-27.

The FCA encourages cryptoasset firms to familiarise themselves with the requirements that will be applicable to them, and to support this, its new websites provide information on the following topics:

• the legislative framework for regulating cryptoasset activities under the Financial Services and Markets Act 2000 (FSMA), Regulated Activities, and the FCA Handbook;
• the minimum standards applicable to cryptoasset firms, including the FCA Principles for Business, the Consumer Duty and the Senior Managers and Certification Regime (SMCR);
• the FCA approach to authorisation, supervision, and enforcement for firms that will be undertaking the new cryptoasset regulated activities;
• the FCA application gateway for firms that are looking to undertake the new cryptoasset regulated activities; and
• HMT’s proposed transitional provisions to ensure that firms that fail to obtain a permission are able to wind down their UK operations in an orderly manner.

The FCA also announced the application period for firms that wish to undertake the new cryptoasset regulated activities on its webpage. The application period will be open from 30 September 2026 to 28 February 2027 for firms that wish to be authorised by the FCA to undertake any of the new regulated activities under the new cryptoasset regime when it takes effect from 25 October 2027.

FCA publishes second consultation paper on regulating cryptoasset activities

On 23 January 2026, the FCA published a second consultation paper (GC26/4) setting out its proposals on how the FCA Handbook should apply to firms conducting regulated cryptoasset activities. This paper also contains a guidance consultation (GC26/2) outlining how Consumer Duty should be applied to cryptoasset firms. The FCA published the first part of its proposals last year and has since considered responses to that paper to develop its proposals. For more details on the first part of the FCA’s proposals, see our October 2025 Update.

Key proposals of the second consultation paper include, among others,

• the application of requirements in the Conduct of Business sourcebook to cryptoasset activities to ensure that firms act fairly and transparently;
• the categorisation of certain cryptoasset firms, such as authorised stablecoin issuance firms and authorised cryptoasset custodians as “enhanced” under the SMCR and the relevant thresholds;
• location policy guidance for international cryptoasset firms, clarifying that the FCA expects firms applying for authorisation to serve UK clients to have UK legal entity presence, such as a UK branch. Note that cryptoasset firms might be assessed individually against the threshold conditions and requirements at the FCA authorisation gateway and during supervision;
• regulatory reporting requirements for firms to report data on both a regular and one-off basis for better monitoring and supervision by the FCA under the Supervision sourcebook.

The consultation is open until 12 March 2026.

BOE published speech on the UK’s digital financial future

On 29 January 2026, the BOE published a speech by Sasha Mills, the Executive Director at the Financial Market Infrastructure (FMI), on the UK’s digital financial future. The speech identified tokenised collateral as its second key innovation priority for 2026, alongside systemic stablecoins and the Digital Securities Sandbox. Tokenisation of collateral involves the process of representing traditional financial assets as digital tokens on a shared, programmable ledger.

Mills explained that tokenised collateral must meet the same resilience standards as traditional collateral to support financial stability, including robust infrastructure and legal enforceability. Where traditional assets are tokenised and risks are appropriately mitigated, the Bank does not expect materially different risks compared with conventional collateral. Importantly, tokenised versions of assets already acceptable as regulatory collateral by central counterparties (CCPs) could be eligible under UK European Market Infrastructure Regulation (EMIR) rules, providing greater clarity for market participants.

The BOE has been consulting on how tokenised collateral could fit within the UK EMIR framework. In July 2025, the BOE published a consultation on the UK’s future regulatory framework for CCPs and restating certain requirements for CCPs in UK EMIR. Mills noted that respondents to the BOE’s consultation have broadly supported the BOE’s direction on tokenised collateral. The BOE has understood from consultation feedback the importance that the BOE conduct robust risk assessment and testing to offer legal certainty to the market and ensure that rights to the tokenised assets are enforceable and assured.

The BOE intends to publish further policy guidance later this year on how tokenised collateral can operate within the existing UK EMIR regulatory framework, anchored to the Principles for Financial Market Infrastructures and informed by international engagement.

In addition, the speech reiterated the Bank’s objectives to refine supervision and onboarding for FMIs. In particular, the BOE is looking at introducing a tiered, proportionate recognition process for non-UK FMIs that classifies FMIs as systemic or non-systemic. Furthermore, the BOE is looking to provide clearer timelines for assessing permissions applications and supporting a new approach to onboarding new FMIs that is tailored to their size, complexity, and risk model. This reflects the Bank’s broader aim to balance innovation with financial stability.

5. UK — AI

UK Treasury Committee warn of artificial intelligence risks in financial services

On 20 January 2026, the Treasury Select Committee (the Treasury Committee) published a report examining the use of artificial intelligence (AI) in financial services and the adequacy of the current regulatory framework. The Treasury Committee cautions that although AI is already widely deployed across the sector, the BOE, the FCA, and HMT have taken a “wait-and-see” approach to AI. As a result, the authorities “are not doing enough” to manage emerging risks, thereby exposing the public and the financial system to potentially serious harm.

The Treasury Committee observed that the evidence provided to the inquiry indicated that more than three-quarters of UK financial services firms are using AI in some capacity. The Treasury Committee acknowledges that AI has the potential to deliver efficiency gains, improve consumer experiences, and support innovation. However, it emphasises that these benefits must be balanced against the significant evidence of risks, including and not limited to the lack of transparency in decision-making; financial exclusion for the most disadvantaged consumers; misinformation and unregulated advice; and increase in fraud.

The report highlights concerns that the approach taken by financial regulators has been largely reactive and reliant on existing regulatory frameworks rather than developing AI-specific rules or guidance. The Treasury Committee notes that the FCA’s current approach gives firms little practical clarity as to how current obligations apply to AI-driven systems and may limit regulators’ ability to identify and mitigate novel risks at an early stage, for example, noting the lack of guidance under the SMCR in the context of AI.

In response, the Treasury Committee makes several recommendations for the authorities:

• The FCA should publish comprehensive guidance for firms on the use of AI in financial service. By end of 2026, the FCA should publish practical guidance for firms on (a) the application of existing consumer protection rules to their use of AI and (b) accountability and the level of assurance expected from senior managers for harm caused through the use of AI under the SMCR regime.
• The BOE and FCA should conduct AI-specific cyber or market stress testing to test firms’ readiness for AI-driven market shocks.
• By end of 2026, HMT should designate the major AI and cloud providers as critical third parties under the Critical Third Parties Regime. In addition, the Treasury Committee highlights that the BOE should use its powers to monitor the Critical Third Parties Regime’s progress and use its power of recommendation to HMT where necessary.

6. UK/EU — Critical Third-Party Service Providers

UK and EU to work more closely on third-party risk

On 14 January 2026, the European Supervisory Authorities and the BOE, the PRA, and the FCA published a memorandum of understanding (MoU) to strengthen cross-border cooperation in the supervision of critical information and communication technology third-party service providers (CTPPs) located in the EU and the UK under the EU’s Digital Operational Resilience Act (DORA) and the UK’s Critical Third Party regime.

The MoU establishes a framework for cooperation, information sharing and coordination in the oversight of EU and UK authorities over CTPPs. It covers

• timely exchange of information on oversight, compliance, incidents, and risk assessment for mutually designated providers;
• coordination of oversight tasks, including possible on-site inspections and supervisory activities when providers operate across jurisdictions;
• confidentiality frameworks for handling sensitive supervisory information; and
• emergency collaboration during incidents, such as in major ICT disruptions, power outages, or cyber-attacks affecting financial stability.

The MoU does not create new legal obligations; however, it formalises practical cooperation between EU and UK authorities to support operational resilience, manage potential risks to financial stability and market confidence, strengthen international cooperation, and reduce regulatory burden and duplication.

7. UK – ESG

FCA publishes consultation on UK Sustainability Reporting Standards

On 30 January 2026, the FCA published its consultation paper (CP26/5) on replacing the Task Force on Climate-related Financial Disclosures (TCFD)–based disclosure rules for in-scope listed companies with the UK’s incoming Sustainability Reporting Standards (SRS). The SRS are the UK’s implementation of the sustainability-related financial reporting standards issued by the International Sustainability Standards Board. Note that the SRS have not been finalised yet; the government is expected to publish the final version in early 2026. We discuss the UK government’s consultation on the draft UK SRS in our July 2025 Update.

Key proposals to note:

• Scope. The rules focus on listed companies that are already subject to the UK TCFD-aligned rules under the UK Listing Rules.
• Climate reporting. The consultation proposes mandatory reporting against the UK SRS 2 (the climate reporting standard) and climate-related sections in the UK SRS S1, with the exception of Scope 3 emissions data.
• Sustainability reporting. The consultation proposes reporting against UK SRS 1 (non-climate sustainability reporting) and Scope 3 emissions data on a comply-or-explain basis.
• Transition plan disclosures. Notably, the FCA does not consider it appropriate to mandate transition plans yet at this stage. Instead, the FCA is proposing a disclose-or-explain requirement for listed companies to include a statement in their annual financial report explaining whether they have disclosed and published a climate-related transition plan, and if not, the reason why.
• Assurance. For greater transparency, companies will be required to disclosure whether they have obtained third-party assurance on their sustainability disclosures and the assurance standards used.

The consultation will close on 20 March 2026. If endorsed, the rules will come into force on 1 January 2027 and apply to accounting periods beginning or after that date on a staggered basis. However, there will be specific transition reliefs available for Scope 3 emissions reporting under UK SRS S2 (starting from the 2028 financial year) and non-climate sustainability reporting under UK SRS S1 (starting from the 2029 financial year).

8. UK — Markets (T+1 Settlement)

FCA updates webpage on transition to T+1 settlement of securities trade

On 26 January 2026, the FCA updated its webpage on the transition of the UK market towards the one business day settlement cycle (T+1) on 11 October 2027 and the faster settlement of securities trades. In particular, the FCA identifies preparatory actions for firms in 2026, such as implementing changes and testing for operational systems and processes, relevant agreements with third-party providers, and counterparty arrangements.

In addition, the FCA also provides a link to the 2025 progress report from the Accelerated Settlement Taskforce and warns that it may take action against firms that are not prepared before the deadline. For more details on effective preparation recommendations, see our November 2025 Update.

9. EU — ESG

ESMA thematic note on “clear, fear and not misleading” sustainability-related claims

On 14 January 2026, the European Securities and Markets Agency (ESMA) published a thematic note on clear, fair, and not misleading sustainability-related claims focusing on ESG strategies. The intention of the thematic note is to explain and clarify ESMA’s expectations towards market participants making sustainability claims.

ESMA sets out four principles for market participants to follow in relation to oral and written communications, such as marketing materials. The thematic note underlines that the principles “do not create new disclosure requirements but aim to remind market participants about their responsibility to make claims only to the extent that they are clear, fair and not misleading.”

Four principles for sustainability-related claims:

1. Accurate. Sustainability claims should be fair and accurately represent the entity and/or its financial products’ sustainability profile without exaggeration or inconsistency.
2. Accessible. Sustainability claims should be based on information that is easily accessible and understand by readers.
3. Substantiated. Sustainability claims should be supported by clear and credible facts, methods, assumptions, and clear comparisons where relevant. They should be based on methodologies that are fair, proportionate, and meaningful. Limitations of information, data, and metrics should be made available.
4. Up to date. Sustainability claims should reflect current data, clearly show the analysis period, and disclose any material changes.

The thematic note also discusses how ESG strategies are commonly presented and highlights risks of vague or misleading language in communications. ESMA provides market observations and notes that references to ESG strategies such as “ESG integration” and “ESG exclusions” are widespread and often inconsistently described. Accordingly, ESMA provides the following positions:

• ESG integration is a strategy generally aimed at improving risk-adjusted returns by factoring in material ESG risks and opportunities. It may be binding or non-binding and does not automatically imply exclusion of assets.
• ESG exclusion is a strategy commonly aimed at avoiding or minimising exposures that are prone to risks or at aligning the portfolio with specific values or norms. The impact on investable universe depends on criteria and threshold ambition.

Furthermore, ESMA provides do’s and don’ts for sustainability-related claims in relation to “ESG integration” and “ESG exclusion” that further set out ESMA’s expectations on applying the four principles in practice.

Simplification of reporting under the Taxonomy Regulation

On 8 January 2026, the Commission Delegated Regulation (EU) 2026/73 (the Taxonomy Simplification Delegated Act) was published in the Official Journal of the EU. The Taxonomy Simplification Delegated Act simplifies the content and presentation requirements relating to disclosing information on environmentally sustainable activities as well as certain technical screening criteria for determining whether economic activities cause significant harm to environmental objectives. It amends the Taxonomy Disclosures Delegated Act, the Taxonomy Climate Delegated Act, and the Taxonomy Environmental Delegated Act.

Key changes:

• Materiality threshold. Undertakings are not required to assess taxonomy-eligibility or taxonomy-alignment for economic activities that are not financially material for the business below certain thresholds. For example, for non-financial undertakings, activities are considered “non-material” if they account for less than 10% of the company’s total revenue, capital expenditure, or operational expenditure.
• Simplification of reporting. Reporting templates under the Taxonomy Disclosure Delegated Act has been simplified with fewer, less granular data points to reduce administrative burden. For example, key performance indicators for financial undertakings, such as the green asset ratio, has been simplified.
• Do no significant harm. The criteria for “do no significant harm” to pollution prevention and control related to the use and presence of chemicals has been simplified.

The Taxonomy Simplification Delegated Act came into force on 28 January 2026 but applies retrospectively from 1 January 2026 onwards.

Please refer to our August 2025 Update on the Commission’s adoption of the Taxonomy Simplification Delegated Act. For further information, see our Sidley Update EU Omnibus Package: Key Changes Proposed by the Commission on ESG Reporting and Due Diligence.

10. EU — AIFMD and EuVECA

European Commission publishes consultation on venture and growth capital funds reform

On 15 January 2026, the European Commission (the Commission) published a targeted consultation on venture and growth capital funds regulatory reforms under its savings and investments union strategy. The consultation aims to understand the barriers that arise from the application of the Alternative Investment Fund Managers Directive (AIFMD), European Venture Capital Funds Regulation (EuVECA), and national legal frameworks for investment funds. In particular, the Commission is considering reforms to boost the competitiveness of EU venture and growth capital fund managers for “small-size alternative investment fund (AIF) managers” and “mid-size AIF managers (AIFMs),” and to help them gain greater capability to scale across the EU single market.

For the purposes of this consultation, the Commission applies the following definitions:

• “Small-size AIF managers”: small, nationally registered EU venture and growth capital fund managers with assets under management (AUM) below €500 million.
• “Mid-size AIFMs”: mid‑size AIFMD‑licensed EU venture and growth capital fund managers with AUM between €500 million and several billion of euros.

The consultation notes concerns from multiple stakeholders that the current €500 million threshold under the AIFMD has become outdated and has captured some venture and growth capital fund managers under the regime’s full-scope rules despite operating at a relatively modest AUM scale. It observes that once the AUM of an AIFM exceeds the €500 million threshold, the AIFM is required to comply with significantly more demanding regulatory requirements within a short amount of time, thereby creating “cliff-edge effects” for growing AIFMs.

In light of the above concerns, the Commission is interested in whether reforms should be made to the current framework for small-size AIF managers and mid-size AIFMs while ensuring investor protection, regulatory oversight, and risk management. Accordingly, the consultation aims to assess and potentially recalibrate the AIFMD’s scope thresholds and potential measures to introduce proportionality to the AIFMD’s requirements for mid-sized AIFMs.

The consultation also seeks insights into the functioning of the regulatory frameworks under EuVECA, a framework that adopts a lighter-touch regulatory approach for venture and growth capital funds. The consultation closes on 12 March 2026.

11. EU — ESMA

ESMA 2027–29 program

On 5 February 2026, ESMA published its 2027–29 programming document. Broadly speaking, ESMA remarks that its future work will be affected by a rapidly evolving regulatory and market landscape against broader geopolitical and economic environments. We have set out a summary of key points relevant to investment managers:

• Simplification and burden reduction. ESMA will prioritise simplification and reduction of burdens, using Savings and Investments Union (SIU) reforms to streamline guidance and Level‑2 measures. This will involve a holistic review of transaction reporting under the EU Markets in Financial Instruments Regulation (MiFIR) and the EU EMIR, and integrated funds reporting/data collection (including Undertakings for Collective Investment in Transferable Securities (UCITS) reporting) under AIFMD and the UCITS Directive.
• Sustainable finance. Sustainable finance remains a central matter. ESMA intends to monitor ESG market trends and greenwashing risks, strengthen supervisory convergence and enforcement of sustainability reporting, and deepen work on transition finance. It will provide input to reviews of the sustainable finance framework, including the input to rulebook reviews — especially the ongoing review of the Sustainable Finance Disclosure Regulation (SFDR). If the EU Sustainability Omnibus package proceeds, ESMA will also monitor implementation changes to the Corporate Sustainability Reporting Directive (CSRD) and the European Sustainability Reporting Standards.
• Investment management. ESMA intends to advance the single rulebook and convergence under AIFMD, the UCITS Directive, and the Cross‑Border Distribution of Funds Regulation. Its priorities include integrated AIFMD/UCITS reporting and monitoring of leverage/liquidity. ESMA notes that the ongoing review of the EU Packaged Retail Investment and Insurance-based Products Regulation and the SFDR may also trigger publication of regulatory technical standards and technical advice by ESMA.
• Investment services. Under Markets in Financial Instruments Directive (MiFID II), the Investment Firms Directive (IFD), and the Investment. Firms Regulation (IFR), ESMA is seeking drive supervisory convergence. It is particularly interested in retail protection in investment services and risks from new products.
• Market integrity. ESMA will foster convergence under the EU Market Abuse Regulation (MAR) and the Short Selling Regulation (SSR), issuing guidance and monitoring net short positions (with intervention powers under SSR). It will publish a STORs report while updating its approach to market abuse risks from social media, AI‑driven trading, and cryptoassets.
• Market transparency infrastructures. For market transparency infrastructures, ESMA will supervise Trade Repositories under EMIR and the Securities Financing Transactions Regulation and Securitisation Repositories under the EU Securitisation Regulation. Its priorities include considering data quality and integrity, operational resilience (governance, IT/security, third‑party risk), and planning for securitisation transparency reforms and convergence work.
• Trading. ESMA will monitor secondary markets under MiFID II/MiFIR and EMIR, focusing on implementing the 2024 MiFID/MiFIR review. This will mean focusing on revised non‑equity transparency, “reasonable commercial basis” market‑data pricing, and the single volume cap (with required monitoring reports). ESMA will support consolidated tapes and continue EMIR‑3 guidance on clearing, thresholds, and the post‑trade risk‑reduction exemption.

ESMA principles on risk-based supervision

On 9 January 2026, ESMA published a document setting out its non-binding principles to support a common EU-wide supervisory culture for ESMA and national competent authorities in direct supervision across markets, entities, and products.

The principles for risk-based supervision aim to create a structured framework for identifying, assessing, prioritising, and addressing risks. The principles are intended to apply to all mandates within the authorities’ remits. ESMA recognises that different models for risk-based supervision exist and notes that while it has decided to introduce its model through an entity-based approach, it can be adapted to other identification models, based on the relevant supervisory authority’s processes.

The key concepts and processes in ESMA’s approach include definition and understanding risk-based supervision, risk identification, risk assessment, and risk prioritisation and treatment. However, ESMA recognises that its principles do not constitute a one-size-fits-all solution. The principles are designed to complement existing frameworks and adapt to different supervisory models. ESMA expects national competent authorities to apply judgment and practically implement the principles within their existing frameworks to support greater convergence and effective supervision across the EU.

12. International — Financial Stability Board

Financial Stability Board publishes its work programme for 2026

On 3 February 2026, the Financial Stability Board (FSB) published its work programme for 2026. The FSB will continue to focus on promoting the stability of the global financial systems. In the report, it identifies the challenges that face global financial systems, which includes digitalisation, the increasing activities of the non-bank sector, and the need for modernisation in terms of regulatory and supervisory approaches.

The report identifies the following key priorities that FSB will work on:

• Vulnerabilities assessments. The FSB plans to deepen its review of vulnerabilities and will prepare a report on private credit. Furthermore, the FSB also intends to explore points of vulnerabilities in the foreign exchange derivative markets or private finance.
• Non-bank financial intermediation. There will be a focus on improving the FSB’s assessment of vulnerabilities in the non-bank financial intermediation sector, particularly the methodologies for the FSB’s assessment. In addition, the FSB plans to continue following up on previous work relating to money market funds, open-ended funds, non-bank leverage, and over-the-counter derivatives.
• Implementation monitoring and evaluations. The FSB will monitor the implementation of its recommendations. As part of this, the FSB will analyse whether there are patterns in the reasons for non-implementation of recommendations and whether the body should adjust the way it develops future recommendations appropriately.