Hedge Funds View | Q2 2025

This edition is packed with insights to ensure you stay up to date with the everchanging regulatory environment. We delve into the Mansion House proposals, the evolving international and EU liquidity frameworks and the latest on the FCA’s proposals for greater transparency in enforcement. We also cover key updates from our teams in Singapore, Ireland, and the UAE.

UK Regulatory Developments

1. Your quick guide to the Mansion House reforms

• Reform, simplification and growth top of the agenda
• Rethinking the client categorisation rules

2. The FCA seeks smarter, more strategic supervision.

• FCA puts Smaller Asset Management Firms and Alternatives under the microscope
• FCA revamps its Enforcement Guide and walks back “Name and Shame” proposals

3. Streamlined sustainable finance and stewardship

• New and improved? The FRC reveals its revised Stewardship Code
• Portfolio managers remain out of scope of SDR

4. Rewriting the Rulebook – a push towards simplification and clarity

• Back to Bundling? The FCA extends rules on joint payments to fund managers
• FCA Proposes a Streamlined Approach to Capital Rules

5. New Rules and Guidance on Non-Financial Misconduct

EU Regulatory Developments

1. Liquidity in Focus: Tools, Trends and Technical guidance

• ESMA’s new toolkit for managing liquidity risk
• IOSCO publishes Revised Liquidity Risk Management Guidance

2. Reassessing Derivatives Reporting and Oversight

• ESMA Consults on EMIR Clearing Thresholds
• AIFMs remain out of scope of MiFIR Transaction Reporting

3. EU continues to develop its sustainable finance framework

• European Commission Reviews SFDR to Simplify Framework and Combat Greenwashing
• ESMA consults on draft RTS under ESG Rating Regulation

International developments

1. Singapore aims for slice of the retail private funds market

2. UAE Corporate Tax updates create new opportunities for fund managers

3. FSB report calls for tighter leverage limits

UK Regulatory Developments

Your Quick Guide to the Mansion House Reforms

Reform, simplification and growth top of the agenda

On 15 July 2025, the Chancellor delivered her second annual Mansion House speech, unveiling the long-anticipated Financial Services Growth and Competitiveness Strategy alongside sweeping package of reforms (the Leeds Reforms). These reforms may present opportunities to streamline operations, access new markets and clients, and leverage cutting-edge technologies. However, they may also bring challenges, particularly in navigating evolving compliance requirements. Below, we unpack the key developments and their implications for managers.

In case you missed it, you can watch the recording of our recent webinar where our subject matter experts unpack the different changes.

The Leeds Reforms are designed to drive growth and modernisation within the UK’s financial services sector. As these reforms progress, it is essential for managers to stay informed about developments to assess their potential impact on their businesses.  Our team of experts is on hand to assist with any questions or support you may need to navigate these changes.

Rethinking the client categorisation rules

The FCA has announced welcome plans to modernise its client categorisation framework, aiming to unlock new opportunities for wealthy and experienced investors while boosting the competitiveness of the UK’s financial services sector. The review will seek to strike a balance between providing sufficient protection for retail investors while avoiding unnecessary and disproportionate restrictions on professional clients.

This initiative is part of a broader effort to support capital markets, drive economic growth, and encourage investment by rebalancing risk and reducing regulatory barriers.

The review has been broadly welcomed in the industry as there has long been a view that the current framework is outdated and inconsistent and prevents sophisticated investors from accessing UK alternative funds.

Our Involvement in Shaping the Changes

We have been actively engaging with the FCA on this issue and by participating in discussions with the regulator and other industry members as well as by providing insights into how similar processes work in other jurisdictions. While the FCA is still in the early stages of its review, we are encouraged that they have expressed interest in implementing changes around the opt-up process for reclassifying clients. We will continue to engage with the FCA as their review progresses.

What This Means for Managers

For fund managers, these changes could broaden access to a larger pool of investors, making the UK a more attractive destination for alternative investments. Managers should monitor developments closely and consider how the potential changes could impact their target market as well as their investor onboarding and classification processes.

The FCA seeks smarter, more strategic supervision

FCA puts Smaller Asset Management Firms and Alternatives under the microscope

In May 2025, the FCA published the findings from its business model review of smaller asset managers and alternative investment firms. The review forms part of the FCA’s broader supervisory strategy for the asset management sector, with a specific focus on strengthening firm resilience and reducing the risk of harm to clients. The FCA praised examples of good practice, but also raised some concerns and warned that too many smaller firms are underestimating their regulatory obligations and operational vulnerabilities.

While the review primarily targets smaller firms, its findings are also applicable to larger firms in the sector. Hedge fund managers—especially those with UK-regulated entities operating under the small AIFM regime—should take note and firms are advised to proactively address potential gaps before supervisory attention arrives at their door. You can read more about the review findings in our client briefing article here.

Key Findings and Best Practices

The FCA's findings highlight several areas where smaller firms can improve their practices:

• High-Risk Investments (HRIs): The review emphasises the importance of effective product governance and compliance with financial promotion rules, especially for HRIs. Firms are encouraged to adopt robust client assessment and categorisation processes to ensure that investments align with clients' risk tolerances.
• Conflicts of Interest:  Smaller firms often face challenges in managing conflicts of interest due to condensed business models. The FCA recommends maintaining a comprehensive conflicts register, implementing tailored policies, and establishing independent oversight to ensure transparency and fairness in business operations.
• Consumer Duty: The review underscores the need for firms to integrate the Consumer Duty into their business models, ensuring that products and services deliver good outcomes for consumers. Firms must assess their role in the distribution chain and ensure that their practices align with the Duty's requirements. The FCA expects firms to act in good faith and provide redress where necessary to prevent consumer harm.

Next Steps and Implications

The FCA will continue to monitor firm conduct and work with those identified as having weaknesses to make necessary improvements. Firms are encouraged to review their practices, particularly in private markets, to align with the FCA's supervisory priorities and support confident investing.

FCA revamps its Enforcement Guide and walks back “Name and Shame” proposals

Following its announcement in March that it intended to drop its controversial name and shame proposals, on 3 June 2025, the FCA published Policy Statement PS25/5 which makes more limited changes to its Enforcement Guide and sets out its final policy on transparency in investigations.

What’s new?

Under its revised policy, the FCA will retain the existing ‘exceptional circumstances’ test to determine when details of an investigation can be made public. However, it has stipulated three circumstances where that test would not need to be satisfied:

• Where there is suspected unauthorised or criminal activity;
• Where the firm being investigated has made information about the investigation public; or
• Anonymised announcements, where the FCA believes it would be helpful to educate people on the types of misconduct they are investigating.

The FCA aims to be a smarter regulator, support growth, protect consumers, and tackle financial crime with greater impact and have prioritised enforcement cases that align with their strategic goals. They have also raised the bar for starting investigations, resulting in fewer but faster cases, while making better use of their other supervisory powers that don’t require formal investigations.

The changes took effect on 3 June 2025.

Streamlined sustainable finance and stewardship

New and improved? The FRC reveals its revised Stewardship Code

The Financial Reporting Council (FRC) has unveiled the revised UK Stewardship Code 2026, with changes that signal a shift in how asset managers think about stewardship. Effective from 1 January 2026, the new Code aims to support sustainable value creation while easing the reporting burden on signatories – a welcome change given the bulky reports that managers were compiling on an annual basis. While the overall structure remains consistent, the new version is intended to be more focused and practical. This update follows a comprehensive consultation process conducted earlier this year, reflecting the evolving expectations of stakeholders in the financial sector.

Fund managers that are already signatories to the Code will need to amend their reports for the 2026 the next reporting cycle (see timing below). This revision also provides a good opportunity for fund managers that are not yet signed up to the Code to consider whether the revised reporting requirements would make it more feasible to apply to become a signatory.

Key Changes to the 2026 Code

We provide more detailed information on the changes to the Code in our insights article available here, including the splitting of the reporting into a Policy and Context Disclosure section and an Activities and Outcome Report.

Transition and Implementation

The 2026 Code becomes effective on 1 January. Existing signatories that submit a full report (i.e. the Policy and Context Disclosures and Activities and Outcome Report) in their usual reporting window (May or October) during the 2026 transition year, will not be removed as a signatory. New signatories will need to meet the FRC’s expectations under the new Code in order to become signatories from 2026. 

Portfolio managers remain out of scope of SDR

Following the feedback received from the consultation initiated in April 2024, the FCA has decided that it is not the right time to extend the Sustainability Disclosure Requirements (SDR) and investment labelling regime to portfolio managers. This will likely come as a relief to many fund managers that are currently out of scope of the SDRs on the basis they are only authorised as MiFID firms. However, mangers are reminded of their obligation to comply with the anti-greenwashing rule, which has been in effect since 31 May 2024.

Although the feedback received from the consultation was largely supportive of the expansion, the FCA wants to ensure that portfolio managers are well-prepared to implement the regime effectively before any new rules are finalised.

The FCA's decision is influenced by the broader regulatory work impacting portfolio managers and, in particular, the anticipated multi-firm review of model portfolio services. This review, announced in the FCA’s asset management and alternatives portfolio letter, will scrutinise how firms are applying the consumer duty to ensure investors receive favourable outcomes from model portfolio services.

Rewriting the Rulebook – a push towards simplification and clarity

Back to Bundling? The FCA's extends new rules on investment research payments to fund managers

The new research payment rules have been extended to UK fund managers, as from 9 May 2025, providing the option to use soft commission (called ‘joint payments’ in the new rules) as a permitted method to pay for research.

The new joint payments model can be used alongside the Profit and Loss (P&L) and Research Payment Account (RPA) models. Firms wishing to adopt the model must comply with FCA rules, including having a written policy, calculating and allocating research costs, managing accounts, setting research budgets, and making disclosures to investors. Implementing the model will require new policies, processes, and client-facing disclosures.

Please see our client note here for more detail.

What's New?

The joint payment option allows UK fund managers (including hedge fund managers and other AIFMs) to bundle payments for research and execution services, a model previously restricted under MiFID II. This change aims to simplify the payment process and enhance the competitiveness of UK fund managers by reducing operational complexities, especially when purchasing overseas research.

Key Features of the Joint Payment Option:

• Flexibility in Research Budgets: Fund managers have the flexibility to set research budgets either at the fund level or aggregated across a fund range, allowing for more tailored investment processes.
• Unified Policies: Firms can establish a single set of written policies across fund ranges, eliminating the need for separate commission sharing agreements (CSAs) at the fund level.

Implementation and Compliance:

Fund managers opting for the joint payment model must adhere to several requirements, including establishing a methodology for calculating research costs, maintaining responsibility for account administration, and making prior and periodic disclosures to fund investors. The FCA also expects fund managers to consider the price and value outcome under the Consumer Duty, when reviewing their current models.

A detailed list of the requirements is set out in our client briefing note here.

Looking Ahead:

As the industry adapts to these changes, fund managers are encouraged to review their current practices and consider how the joint payment option might benefit their operations and investor outcomes.

FCA consults on simplifying capital rules for investment firms

The FCA is taking steps to simplify the regulatory capital rules for investment firms, including many hedge fund managers, as part of its broader effort to reduce unnecessary burdens on firms. The proposed changes, outlined in Consultation Paper CP25/10, aim to streamline the definition of regulatory capital while maintaining high standards of financial resilience and consumer protection.

Key points that hedge fund managers need to be aware of include:

• Removal of UK CRR References: The FCA plans to eliminate all references to the retained EU law version of the Capital Requirements Regulation (UK CRR). These rules were originally designed for banks and are often overly complex and misaligned with the business models of investment firms.
• Simplification and Clarity: The proposals aim to reduce the volume of legal text by approximately 70%, making the rules easier to understand and apply.
• No Change to Capital Levels: Importantly, the FCA has clarified that these changes will not alter the amount of regulatory capital firms are required to hold. Firms are not expected to adjust their capital arrangements as a result of the proposals.

Why is the FCA making these changes?

These changes form part of the FCA’s goal to create a more proportionate and effective regulatory framework that aligns with the needs of investment firms. By simplifying the rules and incorporating them into the FCA Handbook, the regulator is also laying the groundwork for a more integrated approach to prudential regulation.

Next steps

The consultation on the proposals closed on 12 June 2025. The final rules are expected to be published in a policy statement in the second half of 2025, with the new framework set to come into force on 1 January 2026.

New Rules and Guidance on Non-Financial Misconduct

The FCA has released the long-awaited Policy Statement and Consultation Paper addressing non-financial misconduct (NFM) aimed at aligning regulatory expectations across the financial services industry. There is a lot to unpack in the newly published documents, and we have set out the key points below. If you are looking for a more in-depth discussion of the rules and proposals, we invite you to read our Insight article available here. You can also watch the recording of our webinar on the subject here.

Key Developments at a Glance

New Rule for Non-Bank SMCR Firms:

From 1 September 2026, non-financial misconduct, such as bullying, harassment, and violence, will explicitly fall within the scope of the Code of Conduct sourcebook (COCON) in the FCA Handbook for non-bank SMCR firms.

While NFM is not a defined term, the FCA describes it as "unwanted conduct" that violates an individual’s dignity or creates a hostile environment, as well as violent behaviour. This aligns with the Equality Act 2010 definition of harassment but is broader, covering all forms of harassment, even those unrelated to protected characteristics.

The rule applies to misconduct by Conduct Rules staff in relation to:

• Other employees or individuals performing functions for the firm or group.
• Service providers to the firm or group.
• Activities forming part of the firm’s regulated business.

Importantly, the rule does not apply to unregulated parts of a firm’s business that are separate from its regulated activities.

Practical Implications for Firms

• Training Updates: Firms should update training materials to reflect the expanded scope of COCON and ensure staff understand how the Conduct Rules apply to NFM.
• Policy Reviews: While the rule itself may not require significant changes to policies, firms should review and update their frameworks to ensure alignment.
• No Retrospective Analysis: The FCA has clarified that firms are not expected to revisit past NFM-related Conduct Rule breaches unless they believe the rules were previously misinterpreted.

Consultation on Handbook Guidance

The FCA is also consulting on additional guidance to clarify how NFM should be addressed under COCON, and Fitness and Propriety. Key areas of focus include:

• Private vs Professional Life: The FCA has clarified that COCON does not cover private life unless it is relevant to F&P. For example, dishonesty or violence outside of work may still impact F&P assessments.
• Social Media Activity: Lawfully expressed views on personal social media accounts will not generally amount to an F&P issue, even if they upset colleagues. However, repeated minor offences or inappropriate behaviour on social media could raise concerns.
• Managerial Responsibilities: Managers may breach Individual Conduct Rule 2 if they fail to take reasonable steps to protect staff from NFM or provide a safe environment for raising concerns.

The FCA has emphasised that it will only proceed with this guidance if there is clear support from firms.

Next Steps for Firms

Firms should identify the policies and procedures that may need to be updated in light of the new rule and guidance. Firms are also encouraged to provide feedback on the proposed Handbook Guidance by 10 September 2025. If you’d like us to include your views in our response, please let us know.

EU Regulatory Developments

Liquidity in Focus: Tools and Technical Standards

ESMA’s new toolkit for managing liquidity risk

In April 2025, as mandated under the revised AIFMD and UCITS Directive, the European Securities and Markets Authority (ESMA) published its draft Regulatory Technical Standards (RTS) and  Final Report on Guidelines on Liquidity Management Tools (LMTs). These new rules aim to harmonise the use of LMTs across the EU. They are particularly relevant for hedge fund managers, as they provide a clearer framework for managing liquidity risks in open-ended AIFs and address inconsistencies in LMT practices across Member States. The rules will apply to EU fund managers.

Draft RTS: Standardising Liquidity Management Tools

The RTS establish technical standards for the characteristics and application of LMTs, ensuring consistent use across the EU. Key highlights include:

• Selection of LMTs: Managers must select at least two LMTs from those outlined in AIFMD, such as redemption gates, swing pricing, side pockets, and anti-dilution levies.
• Alignment with Fund Characteristics: LMTs must align with the fund’s legal structure, investment strategy, redemption policy, liquidity profile, investor base, and distribution policy.
• Anti-Dilution Mechanisms: The RTS encourage the use of tools like swing pricing and anti-dilution levies to mitigate the impact of large transactions on fund valuation and protect existing investors.

Guidelines on LMTs: Practical Advice for Implementation

• Selection and Calibration: The guidelines provide detailed advice on how hedge fund managers should select and calibrate LMTs based on their fund’s specific characteristics.
• Adapting to Market Conditions: Managers are expected to adjust LMTs to reflect changing market conditions and liquidity risks, ensuring tools remain fit for purpose.
• Mitigating Financial Stability Risks: The guidelines emphasise the role of LMTs in reducing financial stability risks, particularly in the context of Non-Bank Financial Intermediation.

Next Steps

The draft RTS have been submitted to the European Commission, which has three months (extendable by one month) to decide whether to adopt them. Once adopted, ESMA will translate the guidelines into all EU languages. If the RTS are amended, ESMA will adjust the guidelines accordingly.

The guidelines will take effect on the same date the RTS enter into force. Funds established before this date will have a 12-month transition period to comply.

IOSCO publishes Revised Liquidity Risk Management Guidance

On 26 May 2025, IOSCO unveiled its  Final Report setting out revisions to its 2018 Recommendations for Liquidity Risk Management for Collective Investment Schemes alongside updated Implementation Guidance  which sets out technical guidance on how to implement the Revised Recommendations.

The backstory

IOSCO, the global standard-setter for financial markets, first introduced its Recommendations for Liquidity Risk Management in 2018. However, as financial markets continue to evolve, so too must the frameworks that govern them. In November 2024, IOSCO launched a public consultation to gather industry feedback on how these recommendations could be updated to address emerging challenges and align with the Financial Stability Board’s (FSB) guidance on liquidity mismatches in open-ended funds.

The result? A set of Revised Recommendations featuring 17 key principles across six critical areas:

• product design;
• liquidity management tools and measures;
• day-to-day liquidity management practices;
• stress testing;
• governance; and
• disclosures to investors and authorities.

While many of the updates are described as “editorial,” there are several noteworthy changes that hedge fund managers should pay close attention to.

• Categorisation approach (Revised Liquidity Recommendation 3).  The revised recommendations introduce a categorisation approach, requiring responsible entities to ensure that an open-ended fund’s investment strategy and asset liquidity are aligned with its redemption terms, both at launch and on an ongoing basis. This change underscores the importance of designing products with liquidity in mind from the outset.
• Use of liquidity management tools (Revised Liquidity Recommendations 6 and 7) The revised guidance places greater emphasis on the use of a broad range of liquidity management tools, including anti-dilution and quantity-based measures, in both normal and stressed market conditions. IOSCO also recommends the use of anti-dilution tools to mitigate material investor dilution and reduce the risk of a “first-mover advantage.”

What’s next?

IOSCO plans to review how its member jurisdictions implement these Revised Recommendations. A “stock take” has been scheduled for completion at the end of 2026 during which IOSCO will assess whether the current tools are sufficient to address financial stability risks or if further refinements are required.

These updates serve as a timely reminder for fund managers to revisit their liquidity risk management practices. In particular, managers should ensure:

• They have a robust liquidity risk management framework that reflect the level of liquidity in their funds;
• Their liquidity management tools are effective and fit for purpose in various market conditions

For a deeper dive into the updated recommendations, please refer to our detailed client note here.

Reassessing Derivatives Reporting and Oversight

ESMA Consults on EMIR Clearing Thresholds

For hedge fund managers navigating the complex world of OTC derivatives, ESMA’s consultation on clearing thresholds under EMIR 3 is one to keep on your radar. Published in April 2025, the consultation paper proposes amendments to the RTS on clearing thresholds, with the aim of refining the framework for both financial and non-financial counterparties. Here’s what you need to know.

What’s in the Consultation?

The consultation paper outlines proposed amendments to the current RTS, focusing on three key areas:

• Clearing Thresholds: ESMA is tasked with specifying the values of the clearing thresholds for both aggregate positions and uncleared positions. These thresholds, which are set out in the draft RTS, determine when counterparties are subject to the clearing obligation under EMIR.
• Triggers for Threshold Reviews: The draft RTS propose mechanisms to trigger a review of the clearing thresholds, ensuring they remain fit for purpose in a dynamic market environment.
• Risk-Reducing Transactions: Notably, ESMA is not proposing changes to the criteria for identifying “risk-reducing” OTC derivative contracts, as it considers the current framework to be clear on this point. However, it has asked for views on whether further amendments to rules related to these contracts (Article 10) are required.

The consultation period ended mid-June and ESMA aims to publish a final report and draft rules for the European Commission by the end of the year.

AIFMs remain out of scope of MiFIR Transaction Reporting

Hedge fund managers can breathe a temporary sigh of relief. The European Commission (EC) has confirmed it is not currently planning to extend the MiFIR transaction reporting requirements under Article 26 to AIFMs.

The Background

Under the EU MiFIR Review, the EC was required to assess by 29 March 2025 whether Article 26 MiFIR reporting should be extended to AIFMs and UCITS ManCos. There was a lot of industry pushback against the extension and in January 2025, EFAMA (European Fund and Asset Management Association) sent a letter to ESMA arguing against the extension, citing high costs and limited benefits. The 29 March deadline passed without any proposals on the extension being published, and the EC has since confirmed it is not pursuing the extension at this stage.

Could an Extension Still Happen?

While the Commission has shelved the idea, it hasn’t ruled out revisiting it in the future. However, any reconsideration would likely require a new mandate, as the current one expired in March 2025.

The UK Perspective

The FCA has similarly questioned the value of extending transaction reporting to AIFMs and ManCos in the UK, noting limited benefits. While no final decision has been made, the UK is likely to follow the EU’s lead and avoid any further extension of the regime outside of MiFID firms.

EU continues to develop its sustainable finance framework

European Commission Reviews SFDR to Simplify Framework and Combat Greenwashing

The European Commission has concluded its call for evidence on revising the Sustainable Finance Disclosure Regulation (SFDR), as part of its broader initiative to simplify the EU’s sustainable finance framework. The consultation, which closed on 20 May 2025, forms the final stage of public input, initiated in 2023, before the Commission is due to publish its draft Regulation in Q4 2025.

Challenges with the Current SFDR Framework:

The SFDR, introduced to improve transparency and provide investors with detailed ESG information, has faced criticism for its complexity, high implementation costs, and lack of clarity. Stakeholders have reported challenges, including:

• Overlaps with other sustainable finance regulations
• Inconsistencies in key concepts
• Data availability issues

These shortcomings have hindered the comparability of financial products which has increased the risk of greenwashing and unintentionally created barriers to defence-sector investment.

Possible Revisions of the Current SFDR Framework:

The Commission’s call for evidence suggests that revisions to the SFDR could simplify key concepts, streamline disclosure requirements, and explore establishing clear categories for financial products making sustainability-related claims. These categories would be underpinned by common criteria, such as products contributing to the ESG transition, reflect different sustainability objectives, take into account current market practices in terms of available data and financial products, and be easily understandable to retail investors.

Alignment with the Broader EU Sustainable Finance Framework:

The revised SFDR, expected in Q4 2025, aims to ensure consistency across the EU sustainable finance framework, including the Corporate Sustainability Reporting Directive and the Taxonomy Regulation. By improving legal clarity and usability, the revised SFDR aims to support the EU’s broader sustainability goals through enhancing investor confidence, reducing operational costs, and preventing greenwashing.

ESMA consults on draft RTS under ESG Rating Regulation

On 20 June 2025, the ESMA closed its consultation on the draft RTS under the ESG Rating Regulation which will enter into effect on 2 July 2026. The RTS supports the EU’s sustainable finance agenda by aiming to enhance the quality of ESG ratings.

What the draft RTS covers:

• Authorisation and Recognition: ESG providers in the EU must apply for authorisation, while non-EU providers must seek recognition. However, ESMA has proposed merging these processes into a single standard.
• Conflict of Interest Safeguards: Prohibits ESG rating providers from offering certain other services, such as credit ratings, unless mitigation measures, such as physical separation, are instituted.
• Disclosure Requirements: Consolidates various disclosure obligations into a single standard, covering methodologies, data limitations, and organisational details.

Next Steps:

ESMA will publish its final report in Q4 2025 and submit the draft RTS to the European Commission by the 2nd of October 2025. The Regulation takes effect on the 2nd of July 2026.

International Regulatory Developments

Singapore aims for slice of the Retail Private Funds Market

The Monetary Authority of Singapore (MAS) is the latest regulator to publish a proposed framework for retail private market investment funds. Following the increase of democratisation of private funds in the UK through the Long-Term Asset Fund (LTAF) and the EU’s European Long-Term Investment Fund (ELTIF), MAS is consulting on the introduction of a Long-Term Investment Fund (LIF) framework. The aim of initiative is to expand opportunities for retail investors while ensuring robust safeguards for investor confidence.

Our Insight article, available here, delves deeper into the proposed fund structures and the investment options offered under the LIF framework.

A new opportunity

Managers exploring this opportunity should consider key factors: obtaining the necessary licensing to operate as retail LFMCs in Singapore, selecting the appropriate product type (Direct Funds or LIFFs) based on expertise and target investors, and ensuring compliance with the framework’s due diligence, governance, and disclosure requirements.

UAE Corporate Tax Updates Create New Opportunities for Fund Managers

The UAE continues to solidify its position as a global hub for investment by introducing progressive tax regimes that enhance its appeal to fund managers and investors alike. The latest Cabinet Decision No. 34 of 2025 (the "2025 decision") marks a significant step forward, offering expanded Corporate Tax exemptions for Qualifying Investment Funds (QIFs), Real Estate Investment Trusts (REITs), and introducing a new regime for Qualifying Limited Partnerships (QLPs). These changes not only reduce tax exposure but also provide greater flexibility and clarity for investors.

Our UAE team has performed a deep dive into the changes and their implications for investment managers. For a detailed look at the changes and the opportunities they create, read our Insights Article here.

FSB report calls for tighter leverage limits

The Financial Stability Board (FSB) has called for global regulators to consider imposing limits on the amount of leverage that hedge funds and other alternative funds may use in order to address financial stability risks. The recommendations form part of a larger report in which the FSB noted the growing influence of hedge funds and non-bank financial institutions and the potential threats they pose to market stability.

The recommended measures include imposing direct limits on leverage in core financial markets and requiring enhanced position reporting to improve transparency.

Bank of England Governor Andrew Bailey, who chairs the FSB, highlighted that crowded and leveraged positions in government bond markets could create liquidity strains and cross-border disruptions.

Industry Pushback

Hedge fund trade groups, such as the Alternative Investment Management Association (AIMA) and the Managed Funds Association (MFA), have expressed concerns over the FSB’s proposals, arguing that overly rigid regulatory measures could disrupt market efficiency and hinder economic growth. Both organisations advocate for a more tailored, data-focused approach to regulation. AIMA has called for better harmonised risk reporting as a way to manage leverage risks without resorting to overly restrictive policies, while the MFA has cautioned that imposing bank-style regulations on non-banks could lead to market distortions and ineffective outcomes.

There has been no indication of changes in regulation in following the report, however this will remain a key area to watch going forward.

Best of the Rest

UK: Are you prepared for ECCTA?

The new "failure to prevent fraud" (FTPF) offence which is being introduced under the Economic Crime and Corporate Transparency Act 2023 (ECCTA), will be effective from 1 September 2025. The FTPF offence will hold organisations criminally liable if an associate commits fraud to benefit the organisation, its customers, or clients. To avoid liability, organisations must demonstrate “reasonable procedures” to prevent fraud, with government guidance available to assist. Fund managers are encouraged to review and update their anti-fraud policies to address gaps, particularly where existing measures focus only on fraud against, rather than for the benefit of, the organisation. Our Fraud Prevention Toolkit can provide an effective resource for managers who are not yet prepared for FRPF.

UK: FCA speech on combatting market abuse

On 29 April 2025, Therese Chambers, FCA Joint Executive Director of Enforcement and Market Oversight, delivered a speech outlining the FCA's priorities in combatting market abuse. Key focuses include tackling organised crime group insider trading, which accounts for 25% of suspicious order and transaction reports (STORs), addressing strategic leaks and unlawful disclosure of inside information, and enhancing international collaboration to combat the global nature of market abuse. Chambers emphasised the critical role of firms' transaction reporting and the STOR regime, which underpins over 70% of the FCA's market abuse investigations. A consultation paper on improving the UK transaction reporting regime is expected later in 2025.

EU: FiDA back on the EU agenda

After being shelved by the EU for a period, FIDA is back on the agenda. The proposals aim to revolutionise financial data accessibility in the EU by expanding “open banking” style rules recently seen in the payment services arena. The rules will apply across the financial services sector, including to investment firms and AIFMs and will therefore impact fund managers with a presence in the EU. For more information on the rules and how they might impact you, check out our FiDA Hub. We have also published insights article on the start of the trilogues in April 2025 and the resulting simplification proposals from the EU Commission.

Luxembourg: CSSF fines asset manager for breach of organisational requirements

The Luxembourg financial regulator (the CSSF) has fined a Luxembourg fund manager €207,310 for breaches of organisational requirements under the Luxembourg UCITS law. Following a 2021 inspection, the CSSF identified deficiencies in administrative procedures, internal controls and branch oversight, stemming from the manager’s reliance on its parent company’s processes post-Brexit. Issues included inadequate staff training and a lack of independent accounting controls. The fine underscores the importance of robust governance frameworks and highlights the risks of over-reliance on group-level processes, particularly in navigating regulatory complexities post-Brexit.

Ireland: The CBI launches probe into delegation by fund managers

The Central Bank of Ireland (CBI) conducted a probe into delegation practices by fund management companies, driven by concerns about increased reliance on third-party ManCos. In May, the CBI issued a survey to managers to gather insights into their practices and decision-making processes. The CBI emphasised that while delegation is a key feature of the sector, responsibility and effective control cannot be outsourced to third parties. The probe is reflective of the regulator’s broader focus on governance, operational resilience and compliance with enhanced delegation reporting requirements introduced under recent regulatory reforms.

Ireland: Consultation on Irish fitness and probity regime

The CBI consulted on proposed amendments to the Fitness and Probity Regime, first introduced in 2011. Key changes include introducing objective criteria such as qualifications, experience, and time commitments for certain roles, specific provisions for identifying and managing conflicts of interest, and clarifying the assessment of collective suitability and diversity within management teams. The proposals also outline how past events will be evaluated when assessing an individual’s fitness and probity. Additionally, the number of Pre-Approval Controlled Functions (PCF) roles is set to decrease from 59 to 45.

Ireland: CBI considers AIF Rulebook Overhaul to Compete with Luxembourg

The CBI is also considering a review of its AIF rulebook following the Irish finance ministry's Funds Sector 2030 paper, which called for updates to enhance Ireland's position as a leading European fund centre. Key issues identified include outdated provisions on fund subsidiaries, restrictions on lending by non-loan origination funds, and a requirement to treat all investors in the same share class equally, which diverges from the AIFMD’s fairness standard. Legal experts suggest the current rules are misaligned with private market practices, prompting many managers to favour Luxembourg for their fund domiciles. The consultation, which is expected in the coming months, could address these concerns and potentially modernise Ireland's AIF framework to better accommodate private asset funds.