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A £128 million deregulation and a 38-firm Consumer Duty review landed in the same week. Both replace prescription with judgment, and judgment carries a name.
Deregulation is supposed to feel like relief. This week it should feel like exposure. The FCA, that's the Financial Conduct Authority, the UK's main financial regulator, has proposed stripping back the rulebook for asset managers, a package it says will save the industry £128 million a year. Days earlier, it published a review of how 38 firms design and monitor products under the Consumer Duty, the framework that makes named executives accountable for customer outcomes. Under SM&CR, the Senior Managers and Certification Regime, those names belong to specific individuals, and one of them may be yours. Here is the tension. Every rule the regulator deletes is replaced by something else. Your judgment. And the review published the same week shows exactly how the regulator will test whether that judgment actually happened.
What's moving this week
THE ASSET MANAGEMENT PACKAGE — Three Consultations, £128 Million in Savings, and a Regulator Building a Better Model of You
On Tuesday 14 July, the FCA published three consultation papers that together amount to the biggest rewrite of UK asset management regulation since the rules were inherited from the EU. CP26/28 replaces the UK's version of the Alternative Investment Fund Managers Directive with a new homegrown sourcebook, ALTS, for managers of unauthorised funds. CP26/27 tears up three separate remuneration codes and replaces them with a single consolidated code, moving away from prescriptive rules towards an outcomes-focused approach built on firm governance and accountability. CP26/26 creates FRAME, Fund Reporting for Asset Management Entities, a consolidated fund reporting framework. HM Treasury is consulting in parallel on the underlying AIFMD-derived legislation. The FCA estimates the package will save the industry around £128 million a year, most of it from simpler reporting. Consultation deadlines: 16 September (CP26/27), 22 September (CP26/26), 14 October (CP26/28). Final rules are expected in the first half of 2027, implementation targeted for 2028.
Every UK alternative investment fund manager is in scope, and the proposed thresholds redraw the map. Firms managing under £750 million in net asset value would be small AIFMs, a dramatic increase from the £100 million originally floated. Firms between £750 million and £5 billion would be medium, above £5 billion large. Smaller firms gain real freedom from prescriptive requirements. Private markets managers, especially private credit, should read the reporting paper closely: the FCA has been open about wanting more frequent, more tailored data from a sector it considers opaque.
The AI governance implication is in the FCA's own press release. Simon Walls, executive director for markets, described the package as the FCA "becoming a smarter regulator, which is more efficient and effective, using proportionate data collection to better identify risk." Read that carefully. FRAME is not just less reporting. It is better structured, more consistent, machine-readable data flowing into the regulator's own analytics. The FCA is building a data-driven model of your firm. Meanwhile the remuneration code that decides whether senior individuals' pay is at risk when things go wrong is shifting its foundation to governance and accountability. Fewer rules to comply with means more judgments to defend. If your valuations, risk reporting or regulatory returns are produced with AI assistance, the data you file becomes the regulator's evidence base, and the named senior manager who signs it off answers for what the machine produced. Deregulation removes prescriptions. It does not remove names.
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That's it.
THE PRODUCT GOVERNANCE REVIEW — 38 Firms, One Message: Your Monitoring Is the Control
On Friday 10 July, the FCA published findings from its thematic review of how firms design, monitor and distribute products and services under the Consumer Duty. The evidence base was a survey of 38 firms across banking, insurance, payments and e-money, asset management, consumer investments, funeral plans and consumer finance, deliberately spanning small, medium and large firms. The verdict: encouraging progress, significant inconsistency, and an explicit expectation that every firm benchmarks itself against the findings. When the FCA publishes good and poor practice, it is publishing the checklist its supervisors will use next.
This reaches every firm with retail products, not just the 38 surveyed. The good practice is recognisable: products designed around detailed customer understanding, negative target markets defining who a product is not for, dashboards combining complaints, root-cause analysis, feedback and behavioural data. The poor practice is where to focus. Some firms rely too heavily on complaints data to monitor outcomes. Some collect management information but never use it proactively. And some make changes to products and services without adequately measuring whether those changes actually improved customer outcomes.
The AI governance implication: product design, monitoring and distribution are exactly where AI already lives in retail financial services. Personalisation engines, eligibility models, pricing algorithms, recommendation systems, chatbots steering customers toward products. These systems change what customers experience continuously, at a speed no quarterly product review was designed for, and complaints are a lagging indicator that an AI-driven product can outrun for months. If your firm makes algorithm-driven changes to products and cannot demonstrate whether customer outcomes improved or deteriorated, you have matched, word for word, the FCA's published description of poor practice. Under the Consumer Duty, accountability for that sits at board level with named individuals. The question is not whether your dashboards exist. It is whether a named person reviewed them, acted on them, and can prove it.
The BuildMoat angle
A lighter rulebook and an outcomes-focused review are the same regulatory philosophy seen from two sides: the FCA is moving from checking your compliance with prescriptions to checking your evidence of judgment. When the rules shrink, the control environment becomes people. Named individuals exercising documented judgment over outcomes, including the outcomes machines generate. That is a human infrastructure problem, and this week exposes the specific gap: firms have policies and dashboards, but most cannot produce a dated record showing a named person exercised oversight of an AI-influenced decision at the moment it mattered. If you are a Head of Compliance or a Head of AI, this week's work is an inventory. Find every point where an AI system touches product design, outcome monitoring or regulatory reporting. For each one, check whether the accountable senior manager's review leaves a record. Not a policy that says they review it. A record that they did.
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One question to take into next week
Pick one product your firm has changed in the last six months where an algorithm or model influenced the change. Ask your team for the evidence that a named senior manager assessed the customer-outcome impact before the change and after it. If what comes back is a policy document rather than a dated record, you have found your gap, and you found it before the regulator did.
If this is a live problem in your organisation, reply to this email. BuildMoat works with UK financial services firms to build the human infrastructure that closes the gap between AI deployment and regulatory accountability.
BuildMoat — buildmoat.co.uk
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Regulatory commentary is for informational purposes only and does not constitute legal, compliance, or financial advice. Consult a qualified professional for advice specific to your firm. BuildMoat product mentions are editorially assessed and disclosed where a conflict exists.
Until next week.
