General regulatory update – Regulatory Initiatives Grid, ESG and PISCES
Insight
Financial Institutions 360: Regulatory update
Read other sections of this edition of the Financial Institutions 360:
Regulatory Initiatives Grid
On 14 April, the financial regulators published the long-awaited Regulatory Initiatives Grid, which was due to be published in May 2024 but was postponed due to the forthcoming election. The Grid provides a helpful overview of regulatory priorities and timings of proposed regulatory changes.
June is going to be a busy month of publications. Key timings updates to note include:
General regulatory
- Advice Guidance Boundary Review – The FCA intends to publish the consultation documents on targeted support in pensions and retail investments by the end of June.
- Non-financial misconduct next steps – FCA intends to provide an update by the end of June.
- The FCA’s annual review of firms’ compliance with FCA guidance on the treatment of PEPs is due shortly, which may lead to an update of the guidance.
ESG
- The Treasury consultation document on endorsing UK version of the International Sustainability Standards Board disclosure standards due by the end of June, following which the FCA will consult on disclosure requirements for UK-listed companies.
- The Treasury plans to lay secondary legislation relating to ESG ratings by the end of June (creating a new regulated activity), then the FCA will consult on the regulatory regime.
Asset managers
- The FCA is planning to publish a discussion paper on MIFIDPRU market risk capital requirements in Q1 2026.
- The repeal & replacement of the MiFID Org Reg is planned for H2 2025, which will entail both secondary legislation and FCA and PRA policy statements.
Retail lending
- Mortgage Rule Review: in May 2025 the FCA will publish a consultation on "early ideas" to simplify its rules to make it easier to eg remortgage with a new lender, and in June 2025 will publish a discussion paper on the future of the mortgage market, including risk appetite and responsible risk-taking. For further information, please see our update for banks and payments firms.
- The PRA’s new rules on Capital requirements for Small Domestic Deposit-Takers are due in Q4 2025 – this is the part of the "strong and simple" prudential framework for non-systemic banks and building societies.
Payments
- There will be a flurry of cryptoasset related publications as well as the recent publications set out below – at least one discussion paper and four consultation documents are due this year.
- The FCA will be making its proposed changes to safeguarding rules for payments and e-money institutions. The policy statement and interim final rules are due by the end of June, and they are due to come into force in H1 2026.
- The FCA is planning to consult on removing the contactless limit for card payments.
Various items including transferring firm-facing requirements of MiFIR, UCITS etc will be added to the rule book, but no timetable has been provided as yet.
Since the publication of the Grid, the Treasury has published its promised proposals on the reform of the Consumer Credit Act 1974 with a further consultation on their proposals planned in Q1 2026. For further information, please see our update for banks and payments firms.
FCA/Treasury perimeter meeting
On 11 April, the Treasury published a high-level summary of their annual Regulatory Perimeter meeting, held in March.
They discussed matters including:
- The balance between the Government’s commitment to reduce the regulatory burden on businesses, and the need to protect consumers from harm and to ensure market integrity.
- The Treasury notes that its work on regulating ESG ratings providers is “strongly welcomed” by industry.
- The FCA asked for further clarification on matters including the regulation of investment consultants, expanding the coverage of lending to SMEs to the consumer credit regime, and whether legislative change is needed to improve the quality of principal firm oversight over their appointed representatives.
The end of the portfolio letter
The FCA has announced that it will stop issuing portfolio letters at the end of April in an apparent change to its previous supervisory strategy of assigning firms to portfolios, and supervising them according to a strategy set every two years. The FCA is instead planning to publish market reports, including insights from their supervisory work.
The FCA also announced, as previously trailed in its statement regarding work it is doing further to the introduction of the Consumer Duty, that it will start "retiring" historical portfolio and Dear CEO letters, which will still be available on the FCA website but clearly marked as no longer current.
The FCA states that unless otherwise marked, current portfolio letters should still be referred to by firms.
PISCES
On 15 May 2025, the Government published the PISCES regulations, which will come into force on 5 June. These regulations provide the FCA with powers to run a financial markets infrastructure sandbox for PISCES – the PISCES sandbox.
The FCA is expected to finalise its own rules for the sandbox in June. Once they are in force, firms will be able to apply to the FCA to run a PISCES. In an unusual step, on 10 April, the FCA published an interim update on its consultation on its rules, setting out its likely position on consultation responses. The FCA is encouraging interested firms to apply for pre-application support.
The Treasury also published a statement made in parliament regarding the tax treatment of employee share incentives and options when traded on PISCES.
The Government reiterated its plan that the first trading events will take place later this year.
Read our update on PISCES here.
FCA AI testing service & Innovate conference
On 29 April, the FCA announced that it is launching a live AI testing service, which will allow firms to collaborate with the FCA while they check that their new AI tools are ready to be used, whilst providing the FCA with data.
Jessica Rusu, the FCA’s Chief Data, Information and Intelligence Officer, gave a speech at Innovate Global Summit where she talked about this initiative, along with sandboxes, the data lake, the Tech Sprint and how the FCA is using advanced data analytics to identify ‘bad actors’. Ms Rusu also talked about the AI bot the FCA’s Supervision Hub is using, which directs callers to the FSCS or FOS if necessary.
ESG
Pause on extension of SDR to firms providing portfolio management services
On 29 April, the FCA updated its webpage on its consultation on extending the SDR to firms providing portfolio management services. The FCA has decided that “now is not the right time to finalise rules”. The FCA has made it clear in subsequent communications that this is just a pause rather than a final decision.
The FCA intends to focus on its forthcoming multi-firm review into model portfolio services (MPS) and will revisit once that is complete.
Proposed changes to the European Sustainable Finance Disclosure Regulation
The European Commission has published a call for evidence on revising the SFDR, with the stated aims of increasing clarity and ensuring coherence with other rules, including the Corporate Sustainability Reporting Directive and EU Taxonomy rules. They will also be taking into account voluntary reporting standards for smaller companies.
The feedback received by the Commission during its discussions to date indicates there is support for revised rules which would:
- cater for different investor groups and types of financial products;
- make it easier for retail investors to understand investment products;
- take better account of the international reach and exposures of investments; and
- help to direct investment towards diverse sustainability-oriented aims while avoiding greenwashing.
The Commission is considering various proposed changes to the SFDR, including targeted changes and clarifications to the existing disclosures and a more significant change of introducing categories which would reflect products’ different sustainability objectives.
The consultation closes at the end of May, and the Commission is planning to publish a proposal by the end of 2025.
This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.
© Farrer & Co LLP, May 2025
