Money Covered: The Week That Was – 4 September 2026

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

The first of Season 5 of our podcast, Money Covered – The Month That Was, was released this week. David Allinson and Mel Redding discuss the FCA’s proposed section 404 consumer redress scheme for vehicle finance.

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

Headline development 

FCA's new non-financial misconduct regime takes effect

On 1 September 2026, the Financial Conduct Authority's (FCA's) rules on non-financial misconduct took effect. The new rules expand how non-financial misconduct is addressed at non-banking firms. The new non-financial misconduct regime will hold businesses outside banking, such as asset managers and insurers, to the same standards already in place for lenders, with the Code of Conduct's scope being expanded for non-banking firms.

The Code of Conduct does not cover conduct relating to an individual’s private or personal life, however conduct outside the workplace may be sufficiently connected with work to fall within the Code of Conduct. 

The changes also affect the Fit and Proper test (FIT) for individuals in FCA-authorised firms. In particular it will impact firms providing regulatory references, which companies must provide for employees in important roles who are looking to move to new jobs at different companies. Firms will be required to disclose the findings in a reference of when disciplinary action for a breach of conduct rules has taken place.

To read more, please click here.

Tax practitioners

GAAR Advisory Panel finds that disguised remuneration arrangements using dual payments to save tax may be tax abusive 

The GAAR Advisory Panel (the "Panel") is an independent, HMRC appointed body made up of experienced individuals (typically with tax, legal and business expertise) that supports the operation of the UK’s General Anti Abuse Rule (GAAR). The GAAR is a UK tax rule designed to counteract abusive tax avoidance schemes that seek to exploit loopholes in a way Parliament could not reasonably have intended. Where it applies, HMRC can effectively cancel the tax advantage by adjusting the tax outcome to reflect a reasonable result under the relevant provisions. The Panel does not decide a taxpayer’s liability like a court does. Rather it provides an independent view on whether a particular set of arrangement pertaining to tax planning should be regarded as “reasonable” or “abusive”.

The Panel has recently issued three opinion notices on disguised remuneration structures using “dual payment”. In each of the three cases, an introducer company referred workers (often healthcare professionals) to an umbrella company, which supplied those workers to recruitment agencies or end clients. The umbrella company paid the introducer an “introducer fee” broadly equal to receipts from the agency/client less wages, payroll costs and its own fee.  Workers were then paid twice each payroll cycle. This included a low wage (around the living wage) taxed via PAYE and NICs, and a much larger secondary payment from another entity with no tax or NIC deductions. The result was that workers retained over 80% of the amounts billed, while the companies took fees. 

The Panel concluded that entering into and operating these arrangements was not a reasonable course of action in relation to the relevant tax provisions and stated that the steps taken were inconsistent with legislative principles, noting the structures were aimed at exploiting perceived gaps to depress taxable pay below amounts actually received.

To read the Panel's three notices, please click here. 

Pensions

Further reporting requirements set out ahead of pension pot inclusion in inheritance tax

A policy paper has been published by the Government setting out further detail on inheritance tax (IHT) reporting rules ahead of the roll out of changes coming into force in April 2027. From the next financial year, pension pots will form part of a deceased's estate for IHT purposes. HMRC published a note outlining obligations on pension schemes and personal representatives which will apply from April next year. HMRC said in the note: "Where a pension scheme administrator fails to comply with a valid withholding notice, they will become jointly liable for the inheritance tax attributable to the relevant pension death benefits". The note sets out the proposals for information sharing, withholding notices and the pension direct payment scheme.

To read the policy paper, please click here.

FOS developments

FOS Awaiting clear evidence of Consumer Duty effects in insurance market

The Financial Ombudsman Service (FOS) has told MPs that it is still too early to determine whether the FCA's Consumer Duty regime has led to measurable changes in the UK insurance market. Speaking to the House of Lords Financial Services Regulation Committee on 2 September, Chief Ombudsman James Dipple-Johnstone said there are currently no observable complaint trends that can be directly linked to Consumer Duty because cases take time to progress through firms' internal processes before reaching the FOS.

Dipple-Johnstone explained that the FOS already considers Consumer Duty requirements when reviewing complaints, but the relatively recent introduction of the rules means the full impact has yet to emerge. He noted that complaints must first be raised with firms, investigated internally, and then referred to the ombudsman before any meaningful patterns can be identified. As a result, the FOS is not yet in a position to draw firm conclusions about the regulation's effectiveness.

The chief ombudsman also highlighted closer cooperation between the FOS and the Financial Conduct Authority through a memorandum of understanding agreed in 2025, which has improved the escalation of regulatory concerns. He said the FOS continues to apply the rules that were in force when a complaint arose and regularly shares insights from its casework with the FCA, while ensuring investigators have access to the latest regulatory guidance.

Regulatory developments for FCA regulated entities

Advisor banned and fined by FCA for DB transfer advice

The Financial Conduct Authority (FCA) has banned a pension adviser from working in financial services and issued a fine of £742,700 over unauthorised pension transfer advice.

The FCA found that Daniel Thomas had recklessly provided defined benefit (DB) advice to 53 clients about 63 transfers out of DB pension schemes over a period of five years. This was done despite Mr Thomas not being qualified or allowed to provide such advice. Mr Thomas is believed to have earned more than £173,000 in fees. 

The FCA found that Mr Thomas had repeatedly misled clients and pension providers about his qualifications. 

The FCA has emphasised that it is not normally in the best interest of consumers to transfer out of defined benefit pensions, which is why only advisers with specialist qualifications and the correct permissions can advise on DB pension transfers.

To read more, please click here.

FCA conducts multi-firm review on frontier AI and Cyber resistance 

In its recent multi firm review, the FCA highlights that frontier AI is accelerating cybersecurity vulnerability discovery faster than many firms can validate, prioritise and remediate the resulting findings. Firms reported that, without the right controls around these models, AI outputs can quickly become high volume and difficult to assess or action, even where issues are technically plausible. 

Frontier AI refers to the most capable, cutting-edge AI models whose advanced reasoning and automation can materially change how tasks are performed, including in cybersecurity. While these models can help identify and analyse security weaknesses at speed, they may also amplify cyber threats if used maliciously, with potential impacts on firms’ safety and soundness, customers, market integrity and financial stability. A core theme is that frontier AI is becoming a test of organisational resilience, not just a new tool.

Firms reported that the value delivered from AI depends less on the model itself and more on the “harness” around it. For example, governance, controls, tooling, access management, asset and dependency mapping, and specialist human oversight. Without these, AI outputs can create high volumes of technically plausible findings that are difficult to action. The FCA encourages firms to focus on clear ownership, escalation routes, and risk-based prioritisation that looks beyond severity ratings to exploitability, business service impact and vulnerability chaining, while engaging key suppliers on shared dependency risks.

To read the FCA's full review, please click here. 

FCA raises stability concerns as UK private credit sector expands

The Financial Conduct Authority (FCA) has warned about growing concentration risk in the UK's rapidly expanding private credit market, which has more than doubled in size to £335bn between 2021 and 2025. According to the regulator's review of Alternative Investment Fund (AIF) data, the five largest asset managers now control 28% of the market by net asset value, raising concerns about the sector's resilience.

The FCA highlighted the possibility of a credit freeze if a major asset manager were to fail, given the industry's concentration and the increasing use of leverage by some private credit funds. The regulator found that more than 10% of UK-managed private credit funds reported adjusted leverage exceeding 300% of net asset value in 2025. Under AIFMD II, closed-end funds are generally subject to a 300% leverage cap and must take corrective action if they exceed this threshold.

While private credit remains a relatively small segment of the wider £5.1tn UK AIF market and is mainly held by institutional and professional investors, the FCA said the findings expose shortcomings in the current reporting regime. The regulator intends to use the data as evidence supporting proposed reforms to fund-reporting requirements for asset management firms, aimed at improving market oversight and risk monitoring. 

To read more, please click here.

FCA investigates £1.5bn of unclaimed Child Trust Funds

The FCA has launched a supervisory review into how child trust fund (CTF) providers are handling unclaimed or "lost" accounts. According to FCA figures cited in the press, around 760,000 CTFs, with a combined value exceeding £1.5 billion, remain unclaimed despite their beneficiaries having reached the age of 18.

CTFs were introduced in 2005 as tax-advantaged savings and investment accounts for children, with the first accounts becoming accessible at age 18. Many were opened automatically where parents did not select a provider, making it more difficult for providers to maintain contact with beneficiaries following changes of address, name or other personal circumstances. The FCA's review will examine whether providers are doing enough to trace young adults, communicate with them as accounts mature, provide clear information and facilitate access to or transfer of their funds. The review reflects the FCA’s wider focus on customer outcomes under the Consumer Duty and concerns that funds may remain in low-yield arrangements because of complexity or poor engagement.

For asset managers, insurers and banks, the review creates potential operational, financial and reputational risks. Providers may also face pressure to improve tracing processes, communications and digital access, whilst greater coordination with government agencies could help reconnect young adults with their savings.

To read more, please click here.

With thanks to this week's contributors: Lauren Butler, Haiying Li, Daniel Parkin, Sourav Shinagare, 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.