The UK's and EU's parallel agendas of growth and competitiveness are a continuing theme. In the UK, the Chancellor of the Exchequer, Rachel Reeves, delivered her Mansion House 2025 speech in July, unveiling the Leeds Reforms, a programme for financial services reforms to drive investment and growth in the sector. Expressed by the Chancellor as the widest "reforms to financial services regulation in more than a decade," these series of measures include proposals to reassess the current approach to risk and further reduce the regulatory burden for businesses. In parallel, the government, including HM Treasury, has launched the new Financial Services Growth and Competitiveness Strategy, setting out a 10-year vision for kick-starting growth in financial services. Although the EU admits it has lacked urgency in advancing its competitiveness agenda since the September 2024 landmark report by Mario Draghi, former president of the European Central Bank, there is still much to consider. In light of these broad trends, we see the following three themes.
- Sustainability and financing of the defence sector: This is firmly on the agenda, reflecting the UK and Europe's push to unlock private sector investment in defence. As the market evolves with the dynamics of sustainable finance legislation, managers often face challenges in how best to navigate investor demand and sentiment in this field with their assessments of Sustainable Finance Disclosure Regulation (SFDR) classification, disclosures, and good governance practices. The EU's June 2025 publication of the Defence Readiness Omnibus includes a package of measures designed to clarify and confirm the regulatory treatment of sustainable finance investment "aimed at establishing a defence-readiness mindset across the [EU]." Although the UK Financial Conduct Authority (FCA) has confirmed that its sustainability rules do not prevent defence finance or investment, there is currently nothing akin to this EU package on defence investment in the UK.
- Regulatory themes commented on include monitoring: (i) the developments in UK Alternative Investment Fund Managers Directive (AIFMD) reform and the proposed new authorisation thresholds based on net asset value (with an FCA consultation expected in the first half of 2026); (ii) the implementation of AIFMD2 in the EU by April 2026; and (iii) the outcome of the FCA's proposed review of its client categorisation rules to unlock more opportunities for wealthy investors and support capital markets. Governance and nonfinancial misconduct continue to be a focus in the UK, as does valuation processes — in particular, the FCA interest in independent fairness opinions in continuation funds to ensure investors have adequate access to information so they can independently assess the transfer price. US deregulation in the funds space — such as the March 2025 US SEC (Securities and Exchange Commission) no action letter, which loosens the process and verification status for Rule 506(c) offerings in the US, and the August 2025 executive order to encourage sponsors of 401(k) and other Employee Retirement Income Security Act–governed participant-directed defined contribution plans to consider offering access to private assets — are both expected to boost returns and increase competitiveness.
- Failure to prevent fraud (FTPF) offence under the UK Economic Crime and Corporate Transparency Act 2023 (ECCTA): The ECCTA introduced a new offence of FTPF, effective since 1 September 2025, that sees certain organisations liable when a specified fraud offence (including offences under the Fraud Act 2006 such as fraudulent trading) is committed by associated persons (such as employees, agents, subsidiaries, or those who otherwise perform services). If convicted, the organisation can receive an unlimited fine. Although the risks and obligations under the ECCTA may not represent a material departure from most managers' practices (and the large organisation thresholds may exclude all but the biggest managers), managers and their advisers need to consider the FTPF offence and determine whether and how to update internal compliance, due diligence, monitoring, and reporting processes for new and existing investments. This will include investments in portfolio companies and relationships with service providers, such as placement agents, that play a role in bringing investors into the funds.
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