Wholesale Buy-Side Regulatory Priorities 2026 - Private Markets, AI & AIFM Reform
The FCA's 2026 Wholesale Buy-Side Regulatory Priorities Report, published alongside the Wholesale Markets report, sets out supervisory expectations for asset managers, custody banks, and fund service providers. Key themes include private market valuation governance, AIFM prudential reform, the IFPR post-implementation review, AI governance, and the application of Consumer Duty across distribution chains.
Context:
The Wholesale Buy-Side report is one of nine sector Regulatory Priorities reports replacing the FCA's former portfolio letters. It is addressed to asset managers (both traditional and alternative), custody banks, and fund services providers, and explicitly refers firms to the related pensions and consumer investments priorities reports, where there is retail investor exposure.
Private markets are a major focal point. The FCA signals ongoing concern about valuation governance, conflicts of interest in private credit, infrastructure and real estate, and product design decisions, particularly for structures that combine illiquid assets with redemption features or are designed to broaden retail access to private markets. The regulator wants robust frameworks that prioritise asset characteristics over distribution convenience.
On regulation, the report confirms that a call for input on a post-implementation review of the Investment Firms Prudential Regime (IFPR) is coming, followed by a consultation. AIFM prudential reform is also on the 2026/27 agenda. Additionally, the FCA will consult on how Consumer Duty applies across distribution chains, particularly relevant for fund managers who distribute through intermediaries.
Rules and Guidelines:
Private market valuation: firms must demonstrate robust, independent valuation governance; conflicts must be identified and managed consistently with FCA expectations
Product design for private markets: structures combining illiquid assets with redemption features or broadening retail access must demonstrate that liquidity terms, valuation processes, and product governance match the characteristics of underlying assets
Consumer Duty: the FCA plans to consult this year on applying the Duty across distribution chains and clarifying the scope for wholesale-only firms. Until then, all firms with any retail exposure must maintain full compliance
AI governance: firms must establish clear accountability and oversight structures for AI use in portfolio management, data processing, and decision-making
Fund liquidity risk management: the FCA will publish a policy statement on enhancing liquidity risk management for UCITS and non-UCITS retail schemes; AIFMD equivalent consultation to follow
Transaction reporting: firms should engage with the FCA's transaction reporting improvement workstream (CP25/32), a policy statement is expected in Q3 2026
ESG ratings: proprietary ESG ratings provided only as part of an existing regulated activity are not in scope of the new ESG ratings regime (rules effective June 2028)
Businesses Affected:
Traditional and alternative asset managers across all asset classes, including those operating private market strategies
Asset managers distributing through intermediaries who need to understand their Consumer Duty obligations across the distribution chain
Custody banks and fund administration providers who must meet operational resilience and regulatory reporting expectations
Investment firms subject to the IFPR; the post-implementation review directly affects prudential compliance planning
Alternative investment fund managers (AIFMs) are preparing for upcoming prudential reform consultations
Fund service providers processing model portfolio services, SDR labelling, and retail-facing product governance
Next Steps:
Conduct a governance review of private market valuation processes, independence arrangements, and conflicts documentation against FCA expectations
Review products with illiquid underlying assets and redemption features; assess whether liquidity terms, redemption gates, and product governance adequately reflect asset characteristics and Consumer Duty obligations
Map full Consumer Duty exposure across all distribution channels, including indirect retail exposure through intermediaries or platforms; prepare for the FCA's H2 2026 wholesale duty consultation
Engage with the upcoming IFPR post-implementation call for input, document operational experience of the regime, including areas of disproportionate burden or unintended consequences
Establish AI governance frameworks that include clear accountability trails, risk assessments, and testing and validation protocols for all AI use cases in investment and risk management
Begin preparation for the AIFM prudential reform consultation expected in Q3/Q4 2026
Financial Conduct Authority, Regulatory Priorities Wholesale Buy Side
