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FCA Regulatory Priorities Report on Private Market Funds

JD Supra Finance & Banking

Published March 16th, 2026

Detected April 1st, 2026

Summary

The UK FCA published its Regulatory Priorities Report for the Wholesale Buy Side sector on 16 March 2026, replacing portfolio letters and outlining supervisory priorities for private markets over the next 18-24 months. The report emphasizes high standards for valuations, conflicts of interest management, and responsible retail access to private markets.

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What changed

The FCA report identifies private markets as a key supervisory priority, highlighting expectations for firms to review and update valuation governance, strengthen conflicts of interest processes, and align product design frameworks with Consumer Duty requirements. The FCA will conduct multi-firm reviews on conflicts of interest and communicate good practices during 2026, while supporting the Bank of England's system-wide exploratory scenario exercise on private markets under stress.

Firms should review their valuation processes in light of the FCA's Private Valuations Review, ensure robust conflicts of interest identification and mitigation procedures, and prepare for enhanced FCA engagement on risk management practices. Where applicable, firms distributing private market products to retail investors must ensure product governance and liquidity terms align with consumer duty expectations. The FCA expects to provide more detailed guidance on conflicts of interest management in due course.

What to do next

Review and update valuation governance and processes in line with FCA Private Valuations Review
Strengthen identification, management, and mitigation of conflicts of interest
Align product design frameworks for retail distribution with Consumer Duty expectations

Source document (simplified)

March 31, 2026

UK Financial Conduct Authority continues to focus on private market funds

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On 16 March 2026, the UK Financial Conduct Authority (FCA) published its Regulatory Priorities Report for the Wholesale Buy Side sector (the Report). The Report is intended to replace the FCA’s portfolio letters going forward and helpfully summarise the FCA’s areas of focus for the next 18 months, alongside a forward-looking timeline of key milestones and events.

We have summarised the priorities and key takeaways from the Report below.

In Depth

Regulatory priorities and key takeaways

Reinforcing consistent and high standards across private markets

Overview of the FCA’s priorities

Private markets will remain a key supervisory priority for the FCA in the next 18 – 24 months, with the launch of several supervisory initiatives to promote growth and competition whilst maintaining investor protection and supporting financial stability.

The Report highlights the following steps that the FCA expects firms to take to maintain high standards across private markets:

Review and update governance and processes for valuations. Firms should take account of the recent FCA Private Valuations Review;
Ensure the robustness of processes and procedures around the identification, management, and mitigation of conflicts of interest; and
Where applicable, align product design frameworks for retail distribution and ensure that this is consistent with consumer duty expectations. The FCA notes that firms should focus on product governance, valuation processes, liquidity terms, and management of conflicts. The FCA will provide more detailed guidance on its expectations on the identification and management of conflicts of interests in the private markets in due course, and firms should expect enhanced engagement from the FCA on their risk management practices and controls.

We note that whilst the FCA supports retail access to private markets, the Report emphasises that this must be done in a thoughtful and responsible manner and that firms must not ‘design products in a way that prioritises ease of distribution over the characteristics of the underlying assets.’

What to expect from the FCA?

In relation to reinforcing high standards, firms should expect the FCA to:

Continue to engage with firms on valuation practices, management of conflicts of interest, risk management, and plans to broaden retail access to private markets products responsibly;
Continue its multi-firm review of conflicts of interest. The FCA intends to communicate good practice to the private market during the course of 2026;
Continue to support the Bank of England as it conducts a new private markets system-wide exploratory scenario exercise. This exercise will focus on how the private markets ecosystem operates under stress and the potential implications for UK financial stability and the UK real economy.
Undertake focused supervisory work on firms’ approaches to risk management in private markets; and
Support the Financial Stability Board’s deep dive on private credit and its workstream assessing definitions of private finance activities and data gaps across jurisdictions. Evolving regulation and innovation

Overview of the FCA’s priorities

The FCA indicates that it wishes to support the UK’s status as an international investment hub and will progress policy initiatives that are designed to foster growth and competition and ensure that regulation remains fit for purpose.

Whilst the FCA remains open to innovation and proportionate regulation in the private markets space, firms will be required and expected to be able to demonstrate that they have implemented appropriate and robust governance, oversight, and risk management procedures when incorporating AI, tokenisation, and distributed ledger technology into their business processes and service offering. This should include clear accountability, robust oversight, and senior management engagement.

Firms that are developing new products or operating structures which utilise new technology should expect enhanced scrutiny from the FCA.

What to expect from the FCA?

In relation to evolving regulation and innovation, firms should expect the FCA to:

Consult on proposed streamlining and simplification of the rules applicable to alternative investment fund managers (AIFMs);
Implement changes to the FCA’s regulatory data model to remove unnecessary reporting and incorporate global data standards. The FCA states that these changes are intended to complement the FCA’s proposed changes to the transaction reporting regime. However, it notes that, where gaps exist, they may require more data from firms to allow the FCA to monitor concentration and leverage risks that may harm financial stability and market integrity;
Work to digitise and simplify the fund authorisation process;
Progress its work on fund tokenisation. In this regard, the FCA encourages firms that are developing tokenised products to highlight any current barriers to entry;
Continue to support innovation through the Digital Securities Sandbox; and
Consult on streamlining product-level Task Force on Climate-related Disclosures reporting requirements. Preserving market integrity and resilience

Overview of the FCA’s priorities

The Report focuses on cybersecurity threats, third party dependencies, leverage, and concentration risks, and how markets and firms function during stress periods. It emphasises the need for firms to demonstrate that they have robust controls in place to mitigate such threats and risks.

Firms should expect enhanced engagement from the FCA, including via the completion of self-assessment questionnaires, to enable the FCA to better assess the robustness of their risk management procedures.

The FCA expects firms to focus on:

Strengthening operational resilience and embedding it into their processes such as new product design and change management;
Maintaining robust incident response and recovery plans. In this regard, the FCA states that firms should be aware of and mitigate the risks they pose to other firms and their clients;
Assessing and managing dependencies on material third-party providers, ensuring robust due diligence and ongoing monitoring of resilience capabilities;
Strengthening governance frameworks to manage the firm’s impact on markets. The FCA notes that this should focus on effective risk management of investment models and strategies employing leverage, concentrations, and the use of newer technologies; and
Implementing robust systems and controls to detect and prevent market abuse. What to expect from the FCA?

In relation to preserving market integrity and resilience, firms should expect the FCA to:

Continue to monitor and identify outlier firms and funds with high leverage, illiquidity, or concentrated investment strategies to ensure appropriate risk management and liquidity management procedures are in place;
Collect information from a cross section of firms to understand the maturity of their insider risk management;
Consult on enhancing fund liquidity risk management for alternative investment funds;
Finalise the new rules under the FCA transaction reporting regime (the policy statement is expected in Q3 2026);
Enhance engagement on cybersecurity oversight through firm self-assessment questionnaires;
Continue to review asset manager and custody bank operational resilience self-assessments; and
Fast-track the authorisation of investment funds focused on the defence sector (reducing approval times to one month). Delivering good outcomes

Overview of the FCA’s priorities

In line with the consumer duty regime, the FCA expects firms to deliver good outcomes for customers. In this regard, the FCA identifies areas of focus for firms and expects them to take the following actions:

Provide clear communications to investors to enable them to make informed investment decisions; and
Principal firms should maintain strong oversight of appointed representatives and make sure that consumer duty expectations are met in relation to such arrangements (where applicable). Compliance with the consumer duty will be of limited to relevance to firms who do not undertake business with retail clients or ‘in scope’ clients (pursuant to the applicable FCA conduct of business rules). What to expect from the FCA?

In relation to delivering good outcomes, firms should expect the FCA to:

Finalise its policy in relation to client categorisation and conflicts of interest;
Consult on clarifying the application of the consumer duty across the distribution chain and to wholesale firms. The FCA will issue a consultation in the middle of this year;
Focus on outlier firms that design products and services that do not consider consumers’ best interests. This will be relevant to private funds that market to retail investors;
Engage with firms as they implement the new Consumer Composite Investments framework (which will replace UK PRIIPS). This will be relevant in the context of private funds that are marketed to retail investors;
Continue its supervisory work with depositaries to understand how effectively they are delivering against their regulatory obligations; and
Support further implementation of the sustainable disclosure and labelling regime. Other potential reforms

The Report also makes reference to potential reforms of the remuneration and prudential rules applicable to AIFMs, as well as highlighting the upcoming post-implementation review of the prudential regime for investment firms (which also applies to AIFMs with MIFID top up permissions) and the Senior Managers and Certification Regime.

The FCA will continue to finalise its rules for cryptoasset firms, with the gateway for authorisation opening on 30 September 2026.

What does all this mean?

Firms should expect significant and ongoing supervisory engagement with the FCA in the coming 18 months to two years. The Report’s focus on market volatility and stress events suggest that the press coverage over the recent high profile failure of private credit funds has caused a degree of alarm at the FCA. This may have an impact on some of the policy choices and options explored by the FCA in the upcoming consultation paper on reform of the UK AIFM regime (AIFM Consultation).

Whilst the FCA is supportive of retailisation in principle, it has reservations around the appropriateness of such products for the retail market in the absence of appropriate product governance processes and thoughtful consideration of liquidity terms and arrangements. Again, this may be an issue that the FCA addresses in the upcoming AIFM Consultation.

It will be important for firms to demonstrate that they have actively engaged and, as necessary, implemented changes to their policies, procedures, and controls in light of FCA supervisory and thematic reviews, and senior management and internal stakeholders should expect engagement with the FCA on the steps taken to address weaknesses and deficiencies in their processes.

Endnotes

The Report, page 12.

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