Private Funds View - H1 2026

Welcome to the H1 2026 edition of Private Funds View, summarising key UK and EU regulatory developments for private fund sponsors from January to the end of June 2026.

We hope you find it a useful tool to keep on top of key private fund regulatory topics and updates. These are high-level summaries – for further information, follow the embedded links or reach out to one of the team.

Please do let us know if you have colleagues who would like to be added to our distribution list.

Topics in this edition:             

UK

1. FCA private markets conflicts of interest review
2. PRA and FCA consult on securitisation reform
3. New UK Consumer Composite Investments (CCI) regime
4. SM&CR reform
5. Consumer Duty: ongoing review and simplification
6. BoE launches private markets stress testing exercise
7. FCA consults on listing rules for closed-ended investment funds

EU

1. ESMA Report on Marketing Communications
2. EU Taxonomy reporting simplification
3. AIFMD II takes effect across the EU
4. ESMA LMT guidelines and RTS take effect
5. Reforms to the EU Securitisation Regulation
6. ESMA Common Supervisory Action on AIFM compliance
7. CSDDD guidelines consultation
8. ESMA sets priorities for asset management
9. EU Retail Investment Strategy
10. ESMA advances simplification of EU funds and transaction reporting
11. SFDR 2.0 – Council publishes negotiation position
12. European Commission notice on the application of the EU sustainable finance framework to the defence sector
13. European Parliament ECON Committee draft reports on the Market Integration Package

Best of the Rest – OFSI ownership and control | House of Lords Private Markets Report | AR Regime consultation | Short selling regime | VC/growth capital reform | EMIR 3 clearing threshold RTS | ESMA retail investor journey | MiFID II change to research rules | CSSF valuation review | ESMA 2025 Annual Report | Finnish Supreme Administrative Court decision

Main topics

UK

1. CA private markets conflicts of interest review

Q1 2026. The FCA’s conflicts of interest review of private market firms is well underway. Phase 1 involved questionnaires to c.30 firms (responses were due on 2 January 2026), with Phase 2 "deeper dive” follow-ups in Q1 2026. Focus areas include employee-related conflicts, investment allocation and disclosure triggers – mirroring themes from recent enforcement actions.

Continuation vehicles and other GP-led liquidity solutions may be particularly relevant here as they can combine an asset transfer, a cross-fund transaction, a valuation event and an allocation decision. The FCA has previously highlighted continuation funds and co-investments as areas where conflicts can arise.

All sponsors should review conflicts frameworks – including conflicts registers, allocation policies and co-investment procedures – to ensure they are comprehensive, robust and clearly documented. Sponsors should also prepare for potential FCA follow-up queries as part of Phase 2.

2. PRA and FCA consult on securitisation reform

Early 2026. The PRA (CP2/26) and FCA (CP26/6) consulted on a more proportionate and streamlined UK securitisation framework, seeking simplified rules, reduced costs and barriers, and greater clarity for market participants. Consultations closed 18 May 2026.

The proposals are particularly relevant for sponsors running private credit and asset-backed strategies – the reforms could reduce operational burdens and facilitate securitisation as a funding and portfolio management tool. They also signal a broader UK policy shift towards competitiveness

3. New UK Consumer Composite Investments (CCI) regime

6 April 2026. The FCA’s new CCI regime came into effect, replacing PRIIPs KID and UCITS KID disclosure obligations. CCI manufacturers must produce a product summary and core information disclosures. The format is less prescriptive than the PRIIPs KID. Voluntary transition period runs until 8 June 2027.

The new regime is relevant for sponsors offering products to UK retail investors, including closed-ended funds. Sponsors should identify CCIs where they act as manufacturer or distributor and update their investor-facing materials and product governance processes accordingly.

4. SM&CR reform

April 2026. The FCA published PS26/6 setting out the first phase of reforms to the Senior Managers and Certification Regime (SM&CR). The changes are intended to reduce day-to-day administrative burdens and include:

• Extending the validity of criminal records checks for senior manager candidates from three to six months
• Revising the 12-week rule so firms have 12 weeks to submit a Senior Management Function application (with the individual able to continue in role while the FCA decides, and be subject to the Senior Manager Conduct Rules)
• Allowing up to six months to notify changes to Statements of Responsibilities and Management Responsibilities Maps (with solo-regulated firms only needing to submit the latest version if multiple changes were made in that period)
• Giving more flexibility for Certified Persons (e.g. certification aligned to appraisal cycles, more time for Directory updates (20 working days) and shorter timeframes for regulatory references)
• Expanded Handbook guidance on SMF7, SMF18, the allocation and splitting of Prescribed Responsibilities and the Conduct Rules

Most changes took effect on 24 April 2026, and a broader phase of reform is expected to be consulted on later in 2026, subject to HM Treasury changes.

5. Consumer Duty: ongoing review and simplification

H1 2026. The FCA is progressing a multi-strand Consumer Duty review. Key developments include:

• Client categorisation (CP25/36): Proposals to relax elective professional client test via £10m investable assets test or qualitative capability test. Consultation closed 2 February 2026
• Co-manufacturing (CP26/23): Proposals to remove the term "co-manufacturing" from FCA rules. Instead, the FCA is proposing to clearly split roles into principal manufacturers (firms with substantive control over a product) and secondary manufacturers (firms with limited control). The consultation closes on 18 September 2026
• Non-UK customers: Proposed removal from Duty scope (subject to UK expatriate consideration)
• Handbook clarifications (CP25/37): Technical amendments including deletion of COLL concentration rule. Policy statement expected later in 2026

Client categorisation changes and potential removal of non-UK customers from scope are significant for private fund sponsors and could simplify investor onboarding for HNW individuals. Sponsors should monitor FCA outputs post consultations, and plan updates to client categorisation and onboarding processes, including any narrowing of the Consumer Duty’s territorial scope.

6. BoE launches private markets stress testing exercise

19 June 2026. The BoE launched the scenario phase of its second system- wide exploratory scenario (SWES), focused on private markets. 46 firms will model a five-year global recession scenario (7% inflation, 35% equity decline) to assess stress responses and systemic risk amplification. Results are expected early 2027.

This SWES underscores intensifying macroprudential focus on private markets. It is likely to drive expectations around granularity, timeliness and quality of data provided by sponsors. Sponsors may also wish to use the SWES as a benchmark for reviewing data quality, valuation methodologies and stress- testing capabilities for their portfolios.

7. FCA consults on listing rules for closed- ended investment funds

26 June 2026. The FCA published CP26/21, proposing targeted amendments to UK Listing Rules for closed-ended investment funds – focused on conflicts of interest, governance and shareholder protections. Consultation closes 14 August 2026.

The proposals are relevant to sponsors and managers of UK- listed closed- ended funds, especially as regards how funds are structured and marketed, with further implications for board oversight, investor communications and ongoing disclosure obligations. Affected sponsors should consider whether to respond to CP26/21.

EU

1. ESMA Report on Marketing Communications

6 January 2026. ESMA published its third report on marketing requirements and marketing communications under the Cross-Border Distribution of Funds Regulation (CBDF Regulation). The report covers national marketing rules across EU Member States (substantially unchanged since ESMA's 2023 report), cross-border marketing notification data under the AIFMD, and examples of breaches detected by national competent authorities.

Notable breach examples for AIF marketing communications included: describing an SFDR Article 6 fund as "sustainable"; misleading references to adherence to the UN PRI where funds did not integrate sustainability into investment decisions; sensationalist claims without objective data; return statements without required risk disclaimers; and material inconsistencies between marketing communications and prospectus disclosures.

Sponsors reviewing marketing materials for CBDF Regulation compliance should note these examples as potential pitfalls and areas of heightened regulatory focus.

2. EU Taxonomy reporting simplification

8 January 2026. The Commission adopted Delegated Regulation 2026/73 introducing simplified Taxonomy reporting – including a 10% materiality threshold, streamlined templates and targeted DNSH revisions. Applies from the 2025 financial year (with optional deferral).

The change eases operational pressure on sponsors with ESG reporting obligations as part of a broader EU reporting simplification effort.

3. AIFMD II takes effect across the EU

16 April 2026. The transposition deadline for AIFMD II (Directive (EU) 2024/927) passed – the most significant overhaul of EU alternative fund regulation in over a decade. Key changes:

• First harmonised EU-wide framework for loan-originating AIFs / AIFs which originate loans, with rules on risk retention, concentration limits, connected party lending, consumer lending, leverage caps and liquidity management tools, among other things
• Stricter delegation oversight requirements, with enhanced reporting to ESMA on third-country delegation arrangements
• Mandatory selection of at least two liquidity management tools for open-ended AIFs
• Enhanced Annex IV regulatory reporting (applicable from 16 April 2027)
• New UCITS supervisory reporting obligations (applicable from 16 April 2027)
• New conditions for non-EU funds marketing into the EU, including a prohibition on jurisdictions on the EU tax blacklist

AIFMD II fundamentally reshapes the operating environment for EU AIFMs, and has material implications for non-EU managers relying on national private placement regimes. Sponsors should conduct a comprehensive review of their investment guidelines for loan-originating AIFs / AIFs which originate loans, fund disclosures, delegation models and liquidity management frameworks, and prepare for the enhanced Annex IV reporting and tightened third-country marketing conditions.

4. ESMA LMT Guidelines and RTS take effect

16 April 2026. ESMA's revised LMT Guidelines and RTS under AIFMD II apply to new funds (pre-existing funds have a 12-month grandfathering period, meaning they must be fully compliant by 16 April 2027). EU AIFMs of open-ended funds must select at least two LMTs from the regulatory menu, ideally combining at least one quantitative tool (like gates) and one anti-dilution tool, and ensure that their design and use are fully embedded in fund documentation, policies and governance structures.

This is particularly important for private credit funds structured as open-ended vehicles.

5. Reforms to the EU Securitisation Regulation

5 May 2026. ECON approved the Parliament's position on reforms to the EU Securitisation Regulation. The Council adopted its position in December 2025. Key features include: expanded scope of public securitisations, adjusted due diligence/risk retention rules, and a new "resilient securitisation" category with lower capital charges.

Trilogue discussions are expected in H2 2026. The reforms aim to revive EU securitisation markets and may broaden structuring options for private credit managers.

6. ESMA Common Supervisory Action on AIFM compliance

11 May 2026. ESMA published the Final Report on its 2025 EU-wide Common Supervisory Action (CSA), assessing AIFMs' compliance and internal audit functions against the AIFMD Level 2 Regulation. While overall compliance was assessed as satisfactory, the CSA identified recurring weaknesses including: outdated or generic compliance policies; high-level monitoring plans; inadequate reporting to senior management; independence concerns; weak oversight of outsourced or group-level compliance; insufficiently risk-based internal audit planning; and incomplete follow-up processes. ESMA has encouraged NCAs to follow up on identified vulnerabilities, and most NCAs, including the CSSF, are expected to conduct firm-specific follow-up.

AIFMs may wish to proactively benchmark their compliance and internal audit arrangements against the report's annex, which contains detailed examples of good and poor practices.

7. CSDDD guidelines consultation

12 June 2026. The European Commission launched a public consultation (closing 24 July 2026) on guidelines for implementing the Corporate Sustainability Due Diligence Directive (CSDDD). The Commission intends to publish the final, adopted CSDDD implementation guidelines based on the consultation feedback. The guidelines will be adopted in two phases, respectively two and one year ahead of the CSDDD entry into application in July 2029. While the guidelines will be non-binding, they are expected to carry significant practical weight.

This marks the transition from disclosure-focused ESG regimes to operational due diligence, with direct implications for portfolio company oversight and sponsor governance. Sponsors should consider responding to the consultation.

8. ESMA sets priorities for asset management

12 June 2026. ESMA outlined its asset management priorities – focusing on AIFMD II reporting, regulatory simplification and digital innovation (including tokenisation and DLT).

Sponsors should monitor ESMA's follow-up work, engage with consultations where appropriate and ensure internal projects around AIFMD II implementation, reporting simplification and digital tools align with ESMA's direction of travel.

9. EU Retail Investment Strategy

June 2026. The EU Retail Investment Strategy package has been finalised and endorsed by the Council, three years after the Commission first proposed it. There are significant changes to investor protection requirements across several key pieces of sectoral legislation, with impacts extending beyond retail market business. Key developments include:

• New "value for money" requirements for manufacturers and distributors of investment products which (although less formulaic than originally proposed) will require firms to set up new processes that will involve peer group comparison (under MiFID, AIFMD and the UCITS Directive) and comparison against supervisory benchmarks (under IDD)
• Significant changes to inducement tests (and the ability for Member States to impose an inducement ban or to restrict third party inducements to certain products or services)
• Enhanced costs and charges requirements, including the introduction of a standardised template for costs and charges disclosures to retail investors
• Changes to suitability and appropriateness assessments
• New requirements in respect of marketing communications and practices, including on the use of finfluencers
• Enhanced oversight of EU firms providing cross-border services, as well as the oversight of overseas firms targeting investors in the EU through digital means without appropriate licences
• Changes to client categorisation requirements
• Changes to the PRIIPs Regulation, including the addition of a new "Product at a glance" section within the PRIIPs KID, the introduction of comparison tools for multi-option products and the potential for layering of information provided in the PRIIPs KID

The Strategy still requires European Parliament endorsement and legal/linguistic review before Official Journal publication (not expected before Q4 2026). Most changes apply 30 months after publication (c. Q2 2029); some PRIIPs changes apply 20 days after publication.

10. ESMA advances simplification of EU funds and transaction reporting

June 2026. ESMA progressed work on simplifying EU reporting frameworks for funds and financial transactions – reducing duplication and moving towards harmonised data collection across AIFMD, UCITS and related regimes.

Sponsors should monitor forthcoming changes to reporting templates and data fields and plan for the system and process changes that will be required to implement the revised reporting framework.

11. SFDR 2.0 – Council publishes negotiation position

24 June 2026. The European Council published its negotiating mandate for SFDR 2.0, signalling broad support for replacing SFDR's disclosure framework with a product categorisation regime ("Transition", "ESG Basics" and "Sustainable" categories).

ECON vote expected mid-July 2026, with trilogue negotiations in Autumn 2026. Substantive provisions are expected to apply from c.2028–2029.

The proposed professional-only opt-out is significant – products marketed exclusively to professional investors could remain outside the categorisation regime. Sponsors should prepare for transitional arrangements, including immediate disapplication of certain SFDR 1.0 requirements.

12. European Commission notice on the application of the EU sustainable finance framework to the defence sector

H1 2026. Following the Joint White Paper for European Defence Readiness 2030, the Commission published a Notice clarifying that the EU sustainable finance framework (including SFDR, MiFID II and the EU Taxonomy) sets no limits on financing of the defence sector. Defence investments are not considered to automatically result in negative PAI exposures, there is no requirement for such investments not to be offered to clients with sustainability preferences, and defence undertakings can claim Taxonomy-alignment for eligible horizontal investments.

The Notice is relevant for sponsors considering defence sector investments or reviewing ESG policies in respect of defence exposures.

13. European Parliament ECON Committee draft reports on the Market Integration Package

11 June 2026. The ECON Committee Rapporteurs published their draft reports on the European Commission’s Market Integration Package. The substantive proposed amendments were set out in the draft report on the “Master Directive”, which would amend AIFMD and MiFID II among other legislation.

Key proposals relevant to sponsors include: removal of the Commission’s proposed intra-group delegation carve-out; direct ESMA authorisation and supervision of EU management company and AIFM groups with aggregate Union-wide NAV above EUR 150 billion (with enhanced ESMA review powers for groups between EUR 50–150 billion); tightened NPPR restrictions to cover third countries on Annex II of the EU tax blacklist and the EU AML/CFT high-risk list; new NCA powers to impose macroprudential liquidity tools and leverage limits on AIFs; and a 1:1 cap on variable-to-fixed remuneration for AIFM staff, with sustainability and climate-risk criteria integrated into variable pay assessments.

These amendments are a draft report only and remain subject to ECON Committee vote, European Parliament plenary adoption and trilogue negotiations with the European Council, where resistance to certain proposals may be anticipated.

Best of the Rest

UK

House of Lords Financial Services Regulation Committee 3rd Report of Session 2024–26

January 2026. The Committee published its report on private markets growth in the UK, flagging limited data ("unknown unknowns"), valuation concerns, conflicts of interest and leverage in private credit. Financial stability risks viewed as more contained for closed-ended funds.

Sponsors should expect continued supervisory scrutiny and potential future data/reporting requirements.

OFSI consults on ownership and control test

February 2026. OFSI published a call for evidence on how UK financial sanctions ownership and control rules are applied, in response to industry concerns about ambiguity and inconsistent implementation.

Sponsors with complex fund structures should monitor findings as any updated guidance could impact sanctions screening, investor onboarding and ongoing monitoring.

Consultation on the Appointed Representatives Regime

Consultation closed 9 April 2026. HM Treasury proposed bringing ARs within SM&CR scope, replacing the Approved Persons Regime. Principals would need specific FCA permission to act as such. Implementation will be through amendments to FSMA 2000.

Sponsors should review their existing AR arrangements and governance and prepare for potentially strengthened due diligence, monitoring and oversight requirements.

New UK short selling regime finalised

16 April 2026. FCA published PS26/5, finalising the new UK short selling regime. Phase 1 commences 13 July 2026; Phase 2 on 30 November 2026. The new regime simplified aggregate disclosure and updated market maker exemption arrangements with the aim to streamline aspects of the previous framework.

Sponsors engaged in short selling should prepare for the 13 July commencement and ensure they are operationally ready to meet the new requirements.

EU

European Commission consults on venture and growth capital funds reform

15 January 2026. The Commission consulted on reform of venture and growth capital fund regulation (EuVECA, AIFMD, national rules for small/mid-size AIFMs). Consultations closed 12 March 2026; legislative proposal expected Q3 2026.

The reforms could simplify the framework for smaller fund managers and expand eligible investments under EuVECA, potentially boosting access to venture and growth capital.

EMIR 3 – ESMA draft RTS on clearing thresholds

February 2026. EMIR 3 (Regulation (EU) 2024/2987), which entered into force in late 2024, revised the EU EMIR framework including the Active Account Requirement, post-trade risk reduction and clearing thresholds. In February 2026, ESMA published draft RTS revising the clearing thresholds – retaining five threshold categories, clarifying timing of position calculations and enhancing the threshold review mechanism. The final draft RTS have been submitted to the Commission for endorsement.

Sponsors should monitor the adoption timeline and assess the impact of revised thresholds on their clearing obligations.

ESMA Report on the retail investor journey

12 March 2026. ESMA published its report on the retail investor journey – planned actions on streamlining disclosure, simplifying suitability assessments and linking sustainability preferences to SFDR product categories.

The report is relevant to EU asset managers (including AIFMs and UCITS managers) and to non-EU sponsors operating cross-border into the EU. Affected sponsors should review their marketing, disclosure and digital distribution practices considering ESMA's findings and prepare for potential supervisory follow-up or rule changes in these areas.

MiFID II change to research rules

3 June 2026. ESMA published regulatory technical standards (RTS) amending the MiFID II rules on funding investment research. Similar to the FCA's earlier changes, the RTS partially unwind the existing MiFID II requirements on investment research, while introducing new operational and disclosure obligations.

The RTS enter into force on 21 June 2026. Sponsors will need to revisit their research payment models, internal controls and client disclosures to align with the revised framework.

CSSF publishes thematic review on valuation of illiquid assets – Luxembourg

4 June 2026. The CSSF published findings from its thematic review of valuation frameworks for illiquid assets held by Luxembourg-domiciled fund managers. Key themes include: pre-launch valuation reviews, model documentation and independent validation, escalation procedures and stressed-condition preparedness.

Sponsors with Luxembourg AIFMs and/or using Luxembourg structures should benchmark valuation policies against the CSSF's expectations. The review aligns with broader European supervisory trends on valuation risk.

ESMA publishes 2025 Annual Report

17 June 2026. ESMA published its 2025 Annual Report highlighting stronger supervision, regulatory simplification and progress on MiCA, DORA and EMIR 3. There is also a growing focus on cross-border activity, ESG, digital resilience and potential further centralisation of EU supervision.

The report is relevant to EU asset managers (including AIFMs and UCITS managers) and to non-EU sponsors operating cross-border into the EU. Sponsors should align internal projects around ESG, reporting simplification and digital resilience with ESMA's agenda.

Finnish Supreme Administrative Court clarifies boundary between AIF marketing and investment services

17 June 2026. The Finnish Supreme Administrative Court ruled that marketing funds does not automatically constitute reception and transmission of orders (RTO) under the Finnish Investment Services Act. The Court confirmed that RTO must be interpreted strictly in line with MiFID II and is limited to the reception and transmission of actual buy or sell orders.

The case highlights that AIF marketing in Finland does not, on its own, trigger licensing requirements. The FIN-FSA was also criticised for failing to identify precisely which activities crossed from marketing into regulated services. The ruling is of note in that it highlights a challenge to an EU regulator approach which treats all marketing activity as licensable. The court's reliance on CJEU case law gives the reasoning broader relevance across the EEA.