Welcome to the December 2025 edition of the Freshfields FS Insights newsletter, which contains a selection of thought leadership related to the financial services industry published over the past month by Freshfields lawyers from around the world.

UK Autumn Budget 2025

Autumn Budget 2025: a stealthy smorgasbord?

The UK Chancellor of the Exchequer, Rachel Reeves, delivered the Autumn Budget on 26 November 2025. In her much-anticipated second Budget, the Chancellor announced a broad spectrum of tax measures which she said were designed both to secure public finances and make the UK tax system fairer. After much press speculation, rumours and reported U-turns, there is now some welcome clarity on how the government intends to balance the books, with the largest revenue raising measure being a stealth tax increase through the freezing of income tax thresholds.

Outside of the headline grabbing measures, the government has published details on new and ongoing business tax reform measures, a number of which will be included in the upcoming Finance Bill.

In our latest podcast, Josh Critchlow speaks to May Smith, Emily Szasz and Sam Withnall from our London tax team about the smorgasbord of business tax measures they found most noteworthy in the Autumn Budget 2025. Highlights from the podcast discussion are summarised in this blog post.

For a summary of the key Autumn Budget 2025 measures from an employment, pensions and incentives perspective, see this blog post by our London People & Rewards team.

One of the most impactful announcements for growth companies is an expansion of the UK’s Enterprise Management Incentive (EMI) scheme, signalling a clear intention to bolster the UK's status as an attractive hub for start-ups and scale-ups. This follows a broader trend of enhancing the UK’s equity incentive framework to compete on the global stage, particularly in the tech sector. For more information, see our blog post.

Sustainability and ESG

CSRD/CSDDD Omnibus enters last legislative stage

The European Parliament (EP) has agreed its position on the sustainability Omnibus 1, paving the way for the last phase of the legislative process to start: negotiations between the EP, Council and Commission, called “trilogues”, on the final form of the revised CSRD, CSDDD and Taxonomy Regulation. 

Negotiations to get to this point have been particularly tense, with the largest political group, the centre-right (EPP), negotiating possible deals either with its usual centrist coalition partners or with the far-right. In October, a first trilogue mandate adopted by the Legal Affairs Committee (JURI) failed to gather enough support. On 13 November 2025, the EP plenary eventually endorsed a final position supported by the EPP with support of right-wing parties. 

Our blog post highlights the EP’s position on key Omnibus provisions, and explains the steps that will now follow, as the EP, Council and Commission aim to reach agreement on the final wording of the three laws.

ESG ratings providers: UK legislation will bring sector within FCA regulation

The UK Government has been working to finalise the legislation required to bring Environmental, Social and Governance (ESG) ratings providers into the remit of regulation. The Financial Services and Markets Act 2000 (Regulated Activities) (ESG Ratings) Order 2025 was laid before Parliament on 27 October 2025, accompanied by a draft Explanatory Memorandum providing the background to the Order and an explanation of how it will apply.

The draft Order designates the provision of ESG ratings as a regulated activity under the Financial Services and Markets Act (FSMA) with the commencement date of 29 June 2028. This means ESG ratings providers will require Financial Conduct Authority (FCA) authorisation by this date unless they fall within defined exclusions or benefit from certain savings and transitional provisions.

In parallel with the Government’s work, the FCA is in the process of developing its rules-based regime, which it will consult on by the end of the year.

In this blog post, we consider the new framework and key impacts for affected entities.

Cryptoassets

A cautious step forward: the Bank of England’s proposed regime for systemic stablecoins

The Bank of England has published its long-awaited consultation paper on a regulatory framework for sterling-denominated systemic stablecoins – stablecoins that could become widely used in the UK for everyday payments and therefore may pose risks to UK financial stability. The proposals set out how the Bank intends to regulate sterling-denominated systemic stablecoins, while operating alongside FCA oversight for conduct, consumer protection, and market integrity.

Key features include temporary holding limits for users, a new model for backing assets that includes a certain proportion which can be held in UK government debt securities, regulatory capital requirements, same-day redemption requirements, and safeguarding requirements. The consultation also confirms that permissionless blockchains can be used, although issuers remain fully accountable for operational and cybersecurity risks.

For firms operating in or considering entry into the UK stablecoin market, this is a pivotal moment to assess the impact of the proposed regime and to engage with the Bank of England. For more information, see our briefing.

Digital and AI

Turning regulatory clarity into a competitive edge: insights from the DRCF’s AI & Digital Hub Report

The Digital Regulation Co-operation Forum (DRCF) brings together the UK’s four key digital regulators – the FCA, the Competition and Markets Authority (CMA), the Information Commissioner’s Office (ICO) and Ofcom – to take a coordinated approach to the challenges of the digital economy. Its objective is to provide clarity for firms navigating overlapping rules across competition, data protection, communications, and financial services. 

One of its early innovations was its AI & Digital Hub: a year-long pilot of a multi-agency advice service offering free, informal, cross-regulatory advice to innovators – particularly those developing AI or digital technologies with public or societal benefits – whose activities came under at least two DRCF regulators.

Following the end of the pilot, the DRCF published a report on the insights it has learned which will inform the next phase of the DRCF’s work. The report offers useful insight into how regulators are adapting to support innovation in AI and digital technologies. In this blog post, we discuss the key takeaways from the report for companies whose innovations require them to navigate cross-regulatory engagement.

Insurance

Unlocking new capital for UK life insurance

On 14 November 2025, the Prudential Regulation Authority (PRA) published a discussion paper on “Alternative Life Capital: Supporting innovation in the life insurance sector”. Through this discussion paper, the PRA is inviting views from across the industry on how UK life insurers might access alternative forms of capital that do not stem from direct issuance equity or debt. 

Against the backdrop of shifting market dynamics and increasing complexity in capital-raising, the PRA’s discussion paper prompts timely strategic reflection by insurers, investors, and industry partners on how best to adapt and capitalise on regulatory change. For more information, see our blog post.

Financial Ombudsman Service

UK Court of Appeal requires FOS to reduce award in successful JR challenge

In Linear Investments Ltd v Financial Ombudsman Service Ltd [2025] EWCA Civ 1369, the Court of Appeal considered a judicial review challenge to a Financial Ombudsman Service (FOS) decision awarding compensation to a retail investor who had mischaracterised their trading experience. The bar remains high for a successful judicial review challenge to a FOS decision, but this judgment highlights the potential value of judicial review where FOS decisions misstate the law.

The decision is also a reminder to financial services firms that contributory negligence can justify reduction in redress where a customer is at fault as well as the firm. In addition, firms using elective professional client classification should revisit their onboarding procedures in light of this decision to ensure that they collect and assess all of the information required to meet the criteria in the COBS rules.

For more information, see our blog post

Corporate finance firms

FCA flags weaknesses in financial crime & client categorisation

On 20 October 2025, the FCA published key observations from a multi-firm review and survey responses, focusing on financial crime controls as well as client categorisation (COBS3) and certification requirements (COBS4). 

The survey on financial crime controls revealed that about two-thirds of corporate finance firms may not be fully compliant with the Money Laundering Regulations (MLRs) in one or more elements of their frameworks. The FCA’s review of COBS3 and COBS4 compliance also identified gaps in firms’ assessments and records related to client categorisation and compliance with certification requirements.

These findings will interest all FCA regulated firms doing corporate finance business and serve as an urgent call for firms to review and consider whether they need to enhance their internal frameworks. For more information, see our blog post.

Financial crime

FCA highlights shortcomings in UK firms’ financial crime risk assessments

The FCA has published the findings of a thematic review into how firms manage financial crime risk. The review focused on business-wide risk assessments (BWRA) and customer risk assessments (CRA), gathering evidence from a range of firms, including building societies, payment providers and wealth managers through a combination of questionnaires, desk-based reviews of policies and procedures and interviews.

The review, part of the FCA’s 2025-30 financial crime strategy, has identified what the FCA considers to be weak points that could lead to supervisory attention or even enforcement action. Firms should look carefully at the FCA’s review, identify any enhancements they should make to their own BWRA processes and wider AML control environment in the light of it, and ensure that assessment is appropriately documented.

For more information, see our blog post.

Financial advice and wealth management

Navigating consolidation in the financial advice and wealth management sector: Key insights from the FCA’s multi-firm review

The FCA published its findings from a multi-firm review into consolidation trends within the financial advice and wealth management sector on 31 October 2025. With acquisitions involving independent financial advisers and wealth managers on the rise, the regulator examined a sample of these consolidated groups, highlighting good practices and areas for improvement, and reminding firms of the FCA’s expectations around consolidations.

The FCA wants to support consolidators to invest and innovate to provide their clients with good outcomes on a long-term and stable basis. It recognises that consolidation has the potential to bring efficiency, growth and resilience – but if poorly managed, it risks client harm, operational failure and regulatory breaches. To address the regulator’s expectations, consolidators need to consider the relevant regulatory requirements and expectations at every stage of the deal. 

For more information, see our blog post, or see our briefing for a more detailed analysis of the FCA’s review.

Investment advisers and investment funds

2026 SEC exam priorities and implications for investment advisers and investment funds

On 17 November 2025, the Securities and Exchange Commission’s (SEC) Division of Exams released its Exam Priorities for Fiscal Year 2026. The Division publishes its exam priorities annually to identify issues that SEC exam staff has identified as potential risks and/or expect to focus on during its upcoming exams of regulated entities. The 2026 priorities for investment advisers and investment funds include certain topics that have been exam priorities in the past (with some change in emphasis or scope, reflecting the views of new SEC leadership), as well as topics relating to upcoming regulatory changes and topics that respond to significant developments in the asset management industry and markets and to evolving technologies.

A summary of the key 2026 Exam Priorities for investment advisers and investment funds is set out in our blog post. This summary highlights changes from prior years’ priorities, discusses the implications of these priorities for investment advisers and investment funds, and outlines the steps that investment advisers and investment funds can take to enhance their compliance functions, manage regulatory risks, and prepare for an SEC exam.

Capital markets

CEE Capital Markets at a Crossroads: Navigating Divergence and Innovation

On 24 October 2025, Freshfields Vienna hosted its annual CEE Capital Markets Workshop. We welcomed a diverse audience of leading lawyers from the CEE region and clients to explore the trends, challenges, and innovations shaping the future of capital markets.

To set the stage, Freshfields partner Stephan Pachinger highlighted the defining themes of 2025: market resilience in the face of geopolitical uncertainty, the reopening of IPO markets and growing regulatory divergence between the US, UK and EU, and the rise in alternative asset classes, such as private credit and crypto assets.

In his keynote speech on crypto assets, Mario Hössl-Neumann from OSL Group outlined the global landscape in which the regulatory environment shapes innovation and market depth. A core theme was the fundamental tension between the crypto industry’s “code is law” ethos and the requirements of traditional legal frameworks.

Freshfields partners Peter Allen and Doug Smith examined major regulatory shifts in the UK and the US that will have significant implications. From January 2026, a new UK regime regulating public offers and admissions to trading will replace the UK Prospectus Regulation, while in the US, the SEC is considering revisions to the eligibility tests for Foreign Private Issuer (FPI) status.

In the panel discussion "Innovation by Design: Market Infrastructure for a Competitive Advantage," which was moderated by Freshfields principal associate Victoria Hrubesch-Bazil, lawyers from leading law firms in Croatia, Czech Republic, Romania and Latvia shared on-the ground insights in a region in dynamic transformation, focusing on three core themes: the diversifying funding landscape, digital transformation, and the push for market integration.

The conference concluded with Stephan Pachinger highlighting the key takeaway: despite regulatory differences, the CEE capital markets are forging ahead through local innovation and strategic cross-border integration.

For more information, see our blog post.