Money Covered: The Week That Was – 23 October 2026

Welcome to The Week That Was, a round-up of key events in the financial services sector over the last seven days.

The sixth episode of Season 4 of our podcast, Money Covered – The Month That Was, where the team looks at the FCA’s proposed section 404 consumer redress scheme for vehicle finance, is now available.

To listen to this and all previous episodes, please click here.

Headline development

FCA addresses AI in financial services sector in new guidance

The Financial Conduct Authority (FCA) has published guidance on good practice and areas for improvement regarding the use of AI in the financial services sector, which was prepared based on the regulator's learnings from reviewing firms earlier this year. The FCA's chief data, information and intelligence officer, Jessica Rusu, delivered a speech outlining the publication of the guidance, which focusses on three key principles: "consumer centricity, accountability and governance, and operational resilience". The guidance identifies good practices and areas for improvement in relation to the three principles, which include:

1.    Consumer Duty / consumer centricity

Good practices: Firms putting the consumer first by using AI to assist with identifying vulnerable customers and defining the client need first before considering if AI is appropriate.
Areas for improvement: Firms only assuming AI outputs are clear, and creating automated processes for customers with inflexible options and minimal support.

2.    Governance and accountability

Good practices: Setting up independent panels to test the ethics of suggested AI use and providing ongoing training.
Areas for improvement: Firms putting governance in place after the deployment of AI technology and ensuring that decisions are documented appropriately.

3.    Operational resilience

Good practices: Firms stress-testing AI tools before deployment or piloting lower risk use before deployment and evaluating suppliers' AI use.
Areas for improvement: Firms ensuring AI is considered when reviewing operational resilience, and testing assurances from suppliers without relying blindly on such guarantees.

The FCA is clear that AI adoption is here and the technology is "moving faster than any regulatory framework was designed" and that the regulator will act as it sees fit to ensure the sector remains trustworthy for consumers.

To read the guidance, please click here.

Regulatory developments for FCA regulated entities

FCA publishes proposed DeFi guidance to tackle financial crime

The Financial Conduct Authority (FCA) published proposed guidance for regulated firms that use or interact with decentralised finance (DeFi), highlighting heightened exposure to financial crime and cyber risks where controls are not proportionate or kept up to date. DeFi is a blockchain based financial system allowing peer-to-peer lending, borrowing and trading. The FCA stresses the guidance does not create new rules, but is intended to clarify how existing requirements apply in DeFi contexts.

The consultation flags several DeFi-specific risk factors, including (1) cross-chain bridges (which can make transaction tracing harder), (2) flash loans (which can enable large-scale market manipulation or exploitation of vulnerabilities), and (3) mempool transparency (which may facilitate transaction-order manipulation such as “sandwich attacks”). The FCA also notes governance and accountability challenges where financial crime controls may be fragmented across multiple infrastructure providers, alongside limited customer due diligence, reduced opportunities to intervene in automated transactions, and rapid cross-chain movement of funds (potentially amplified by AI agents). Cross-border DeFi activity is highlighted as adding complexity in assessing regulatory obligations and the effectiveness of financial crime controls.

The FCA is inviting feedback on the proposed guidance until 18 November 2026 and expects to publish final guidance in early 2027.

To read the proposed guidance, please click here.

FCA to publish updated simplified advice rules 

The FCA is set to soon publish updated rules designed to support “simplified advice” - a narrower, more streamlined form of regulated financial advice, designed to let firms give a personal recommendation to a consumer, but within a limited scope, at a cheaper price. 

The FCA will publish this advice alongside new case studies produced with the Financial Ombudsman Service, as it seeks to expand the types of help consumers can access when making investment decisions and for those who do not need full regulated advice.

Speaking at the Investment Association’s annual dinner in London, FCA deputy chief executive Sarah Pritchard said the regulator wants to encourage innovation while keeping a stronger focus on consumer outcomes through the Consumer Duty. She argued that building a healthier retail investment culture requires more than incremental rule changes, and that consumers need clearer support to understand both the risks of acting and the potential cost of doing nothing.

Click here to read more. 

What good practice looks like in a CFD Firm

A contract for difference ("CFD") is a cash settled, leveraged derivative where the parties exchange the change in value of an underlying asset between opening and closing, without any ownership of the asset. It’s essentially a way to speculate on price movements using margin, which can amplify losses quickly. CFD firms typically onboard and categorise clients, quote prices, and facilitate opening/closing positions, earning spreads/commissions and financing charges while hedging or otherwise managing market risk. 

The FCA’s recent good-practice guidance highlights strong governance with clear senior ownership, meaningful management information, and decision records that explain the rationale. It also stresses cautious distribution, avoiding marketing that implies quick wins, with tight approval, active monitoring and swift fixes when promotions drift. Appropriateness assessments should genuinely test understanding of leverage, margin calls and rapid loss dynamics rather than being optimised for pass rates. Firms should also be candid about conflicts and evidence controls where revenue may benefit from trading frequency or customer losses, including limiting harmful incentives and behavioural nudges.

Click here to read the FCA's recent guidance.

FCA states that line between regulated and unregulated AI financial advice becoming blurred

On 19 October 2026, Jessica Rusu, the Financial Conduct Authority's (FCA's) chief data, information and intelligence officer delivered a speech at Bloomberg's UK Policy Series, regarding the future of finance in the age of AI. 

In her speech, Rusu confirmed that AI is changing what happens before a consumer ever reaches a regulated firm, with consumers turning to general-purpose large language models for financial information and advice, while regulated firms are beginning to integrate their services into AI platforms. While this can significantly widen access to financial tools and information, it can also blur the boundary between regulated and unregulated activity, and the protections consumers receive. 

Rusu confirmed that 80% of less-experienced investors aged 18-40 have used AI to help with investing, but only 40% of consumers correctly recognise that there is no recourse if something goes wrong after acting on advice from a general-purpose AI tool. The FCA is calling on AI providers to help consumers understand the limits of financial information and advice generated by their models through clear, proportionate and consistent disclaimers.

The FCA has stated that as AI evolves towards increasingly autonomous systems, firms should put consumers first, maintain clear accountability and plan for when things go wrong. Rusu also confirmed that the FCA is becoming a smarter regulator, using AI in its own work.

To read the speech, please click here.

FCA Consults on further perimeter guidance for crypto-asset activities

On 21 October 2026, the Financial Conduct Authority (FCA) published their consultation paper CP26/36 proposing amendments to its Perimeter Guidance manual (PERG) to reflect changes to the UK crypto-asset regime introduced by the FSMA 2000 (Cryptoassets) (Miscellaneous Amendments) Regulations 2026 (the Regulations). 

The Regulations were laid before Parliament on 15 September 2026 and introduce, among other things, exclusions from the FSMA authorisation requirement for certain crypto-asset activities.

The consultation paper proposes updates to PERG 18 to explain the FCA’s view on how the Regulations apply in practice, including how new exclusions interact with regulated crypto-asset activities. The FCA also proposes consequential amendments to PERG 8 to align financial promotion perimeter guidance with changes made to the Financial Promotion Order 2005 by the same Regulations. 

The consultation closes on 18 November 2026, with final guidance expected to be published in spring 2027. The FCA acknowledges the timing of the Regulations may have created uncertainty for a small number of firms and indicates it will exercise limited forbearance where uncertainty around the technical services provider exclusion has materially affected an application. The application period for existing UK crypto-asset businesses seeking to carry on new regulated crypto-asset activities closes on 28 February 2027.

To read more on the FCA website, click here.

FCA feedback statement (FS26/3) on expanding consumer access to investments

On 16 October 2026, the Financial Conduct Authority (FCA) published their feedback statement FS26/3 on expanding consumer access to investments following their discussion paper DP25/3 published in December 2025. The statement responds to industry and stakeholder feedback on the FCA’s DP25/3 which asked how the FCA’s rules and regulatory framework could better support a stronger “investment culture” among consumers who invest without an adviser.

DP25/3 was framed as an open discussion on whether the FCA’s existing regime appropriately supports “direct” consumer investing, while still maintaining consumer protection. FS26/3 closes the initial feedback loop: summarising what the FCA heard in response to the DP25/3 and identifies specific areas where the FCA intends to do further work, including potential future consultations and supervisory activity.

For firms involved in manufacturing and/or distributing investment products to non advised consumers, you may wish to:

i.    sanity check current approaches to high-risk promotions and ensure internal interpretations are consistent across channels and products;

ii.    review appropriateness assessment design and evidence of how it performs in practice;

iii.    prepare for a possible recalibration of expectations around risk information, particularly for mainstream investment promotions ahead of the FCA’s first half 2027 consultation;

iv.    for MPS manufacturers, revisit how “good outcomes” are evidenced across the product lifecycle in anticipation of the FCA’s published findings in Q1 2027.

Key findings

Three key points to take away from FCA's FS26/3 are:

1.    Regulatory reform is on the horizon: the FCA’s FS26/3 sets out its plans to expand consumer access to investments while maintaining appropriate protections, signalling a targeted programme of reform rather than immediate rule changes. 

2.   Financial promotions and risk disclosures under scrutiny: the FCA will review whether high-risk investments with similar risks are subject to consistent promotion rules, alongside a planned consultation on risk information for mainstream investments in early 2027. 

3.  Firms should prepare for closer regulatory attention: reviews of appropriateness assessments and model portfolio services could have significant implications for investment firms’ compliance frameworks and their ability to demonstrate good consumer outcomes. 

To read the FS26/3 in full, please click here.

With thanks to this week's contributors: Lauren Butler, Andrew Cox, Daniel Parkin, Damien O'Malley and Dorian Nunzek.

If you have any queries please do get in contact with a member of the team, or your usual RPC contact.