Structured Products Bulletin: Q1 2025

Welcome to our structured products bulletin which provides a review of key legal and regulatory developments in the structured products space during the first quarter of 2025.

The first quarter of 2025 has been dominated by global geopolitical fragmentation, an ongoing transatlantic trade war and increasing anxiety over the fragility of international security. Ripple effects include inflationary pressures, interest rate volatility and recession fears. Growing support for the adoption of an increasingly deregulatory agenda, evidenced by recent political pushback on achieving climate change and sustainability ambitions, demonstrates the direction of travel towards regulatory retrenchment.

Launching its 2025 work programme, the European Commission's key initiatives for 2025 are driven by a simplification and implementation agenda, which seeks to reduce administrative burdens and streamline EU rules. Aspects of this work will be guided by the strategic framework of the newly-launched Competitiveness Compass, which champions deeper and more liquid capital markets as well as economic dynamism within the EU. For financial markets, much of this is underpinned by the new Savings and Investment Union on which a strategic plan has now been launched.

In the UK, regulators are continuing to take forward a number of proposals laid out in the 'Edinburgh Reforms' to establish a new regulatory architecture post-Brexit. Consultations are underway in relation to regulatory reforms in several areas affecting structured products, including prospectuses and debt offerings to retail investors, short selling, transaction reporting and new product information rules for consumer composite investments.

We are pleased to set out our first quarter update of 2025 covering legal and regulatory developments affecting structured products below.

EU

EU Listing Act package: Prospectus Regulation

ESMA Consultation on Draft Guidelines relating to supplements that introduce new securities to a base prospectus

Amendments made in late 2024 to the EU Prospectus Regulation by the EU Listing Act include rules preventing a supplement from being used to introduce a new type of security for which the necessary information has not been included in the base prospectus. ESMA is tasked with developing guidelines on this topic, which are required due to divergent approaches being taken across the EU to supervision of these so-called "product supplements".

On 18 February 2025, ESMA issued a Consultation Paper on this topic which sets out draft guidelines that aim to introduce clarification and reduce inconsistent analysis across the EU of when a supplement is required. It has not always been clear whether amendments to a base prospectus to bolt on new products to a programme by way of a supplement is advisable. ESMA's proposals set out draft guidelines on the approach taken by the revised Prospectus Regulation. In particular, ESMA notes that issues arise frequently with regard to supplements for the inclusion of various types of structured product in the base prospectus of a plain vanilla debt security, or other structured product. The proposed guidelines would:

• Clarify the role of a supplement under Article 23 of the Prospectus Regulation and the nature of the information an issuer should or should not include, distinguishing between information that is material to securities that an issuer can already issue under a base prospectus  and information that would introduce new features and/or risks not covered in the base prospectus (and should therefore not be approved); and

• Explain what issuers should do when submitting a "product supplement" to a national competent authority, and encourage issuers to provide information on all the types of non-equity securities they reasonably expect to issue during the 12-month validity period of the base prospectus (such as green/sustainability-linked bonds, equity-linked notes, index-linked notes etc) within that base prospectus. ESMA acknowledges that there is a trade-off between flexibility of market access for issuers, and prospectus length and comprehensibility. The draft guidelines also give examples of supplements that do not introduce a new security relative to those already described in the prospectus, such as the addition of a new currency as an underlying in a base prospectus for the issuance of currency-linked notes.

ESMA seeks feedback on the proposed guidelines by 19 May 2025, and plans to publish its final report and guidelines for submission to the European Commission in Q4 of 2025. The text of Article 23 mandates that the guidelines will be available by 5 June 2026.

European Commission Targeted Consultation on the reduced content, standardised format and sequencing of the EU follow-on and growth issuance prospectus

On 18 March 2025, the European Commission issued a short Targeted Consultation on the reduced content requirements, standardised format and sequence of two new types of short-form prospectus that were introduced by the EU Listing Act's amendments to the Prospectus Regulation and which will be available from 5 March 2026:

• The EU "follow-on" prospectus: this replaces the simplified disclosure regime for secondary issuances and the (now-expired) EU recovery prospectus regime and will be available for follow-on issuances by companies whose securities have been admitted to trading on a regulated market or SME growth market for at least 18 months on a continuous basis; and

• The EU "growth issuance" prospectus: this is for use by SMEs, companies listed or to be listed on SME growth markets, and for small unlisted public offers of securities up to €50 million.

The revised Prospectus Regulation already contains some formatting requirements for these types of prospectus (including page limits, readability requirements and standard information sequencing). However, the legislation also provides for the Commission to further specify the content and format requirements for these prospectuses, so input is being sought on the most efficient and least burdensome requirements for their format and sequence, whether there should be greater flexibility for non-equity follow-on and growth issuance prospectuses, and whether the existing Annexes are sufficiently clear such that only certain items describing the securities would need to be added.

The European Commission seeks input on the consultation by 2 May 2025.

ESMA re-prioritisation of 2025 deliverables

On 3 March 2025, ESMA sent a Letter to the European Commission noting that it will delay and deprioritise certain deliverables under its various mandates from the Commission to deliver technical standards in relation to several pieces of European legislation. In particular, ESMA's deliverables under the revisions to the Prospectus Regulation (made by the EU Listing Act) have been deprioritised as follows:

• Technical advice to the European Commission on prospectus cooperation agreements with third country national competent authorities (initial deadline 30 April 2025; delayed by 12 months);

• Implementing technical standards on the template and layout of prospectuses, including the font size and style requirements (initial deadline 14 November 2025; delayed by a minimum of 12 months); and

• Implementing technical standards on the template and layout of summaries, including the font size and style requirements (initial deadline 14 November 2025; delayed by a minimum of 12 months).

In relation to the technical standards on standardising the templates and layout of prospectuses and summaries, the general view is that imposing prescriptive requirements in these areas is not needed, thus the delay is not problematic but rather is welcomed.

Benchmarks Regulation

Progress towards second reading of proposed Regulation amending the Benchmarks Regulation (BMR)

On 16 January 2025, the European Parliament's Committee on Economic and Monetary Affairs (ECON) approved the provisionally agreed text of the proposed Regulation amending the BMR. On 19 February 2025, the European Council published an Information Note attaching a letter which confirms that ECON will recommend that the Council's position (which it adopted on 24 March 2025) be adopted without amendment at second reading. An Annex to ECON's Information Note contains the text of the proposed Regulation amending the BMR in the form provisionally agreed following interinstitutional negotiations, and the text of the BMR as at 12 March 2025 was subsequently published by the Council.

The European Parliament's procedure file for the proposed Regulation shows that the indicative plenary sitting date for the second reading will be 6 May 2025.

Among the proposed amendments to the BMR include the removal of non-significant benchmarks from the scope of the legislation. In practice, this would mean that issuers of securities linked to a non-significant benchmark (such as a proprietary index) would no longer be able to benefit from the reduced disclosure requirements under the EU Prospectus Regulation, from the proposed implementation date of 31 December 2025. This is because the administrator would no longer be required to register or become authorised under the BMR and as such would no longer appear on ESMA's EU BMR register (unless the administrator voluntarily seeks to have its benchmarks deemed as 'critical' or 'significant'). The EU Prospectus Regulation provides derogations from disclosure requirements where the administrator of the benchmark is included in ESMA's EU BMR Register. If an issuer is contemplating the issuance of index-linked securities by way of final terms (or a programme establishment), the EU Prospectus Regulation-compliant base prospectus should be updated (or drafted) to include appropriate descriptions of the specific indices contemplated in order to satisfy the relevant disclosure requirements of the EU Prospectus Regulation.

ESG / Sustainable Finance

European Commission "Omnibus" proposals for simplification of the sustainability rules

On 26 February 2025, in line with one of the fundamental objectives of the EU's Competitiveness Compass, the European Commission published its Omnibus I and Omnibus II legislative proposals which aim to bring a degree of simplification to the various sustainability reporting, due diligence and taxonomy provisions with which EU companies must comply. The proposals will in particular benefit small- and medium-sized companies for whom the compliance burden is the heaviest. The package proposes amendments to:

• The Corporate Sustainability Reporting Directive (CSRD) to reduce the number of companies within its scope by 80%;

• The Corporate Sustainability Due Diligence Directive (CSDDD) to postpone its application by a year and bring forward the development of planned Commission guidance setting out best practices for due diligence and simplify various other aspects of the CSDDD's requirements;

• The EU Taxonomy to introduce additional simplifications and only require voluntary reporting of Taxonomy alignment in certain cases (and related amendments to three of the Delegated Acts established under the Taxonomy Regulation);

• The Carbon Adjustment Mechanism (CBAM) to simplify its operation and reduce the number of businesses it applies to; and

• The InvestEu and European Fund for Strategic Investments (EFSI) Regulations to simplify the various requirements of the EU investment programmes and unlock a significant amount of EU investments through a streamlining of their operations.

The move towards simplification of EU sustainable finance legislation will be widely welcomed although there are concerns around the weakening of corporate accountability and increased uncertainty. While the impact on green bonds is expected to be minimal - the EU Green Bond Regulation remains untouched by these proposals - the commitment to implementing high standards in capital markets (with green bonds underpinned by Taxonomy data) risks being undermined by regulatory fragmentation, and the proposals could be viewed as penalising early adopters of sustainable financing methods. 

The legislative proposals will now be subject to trialogue negotiations between the European Commission, Council and Parliament over the coming months and are expected to be finalised later in 2025.

For further information, please see the Simmons & Simmons Insights Briefing on the EU Omnibus I and II packages and a further Insights Briefing on the proposed changes to the Taxonomy Delegated Acts.

Update on Technical Standards under the EU Green Bond Regulation

On 14 February 2025, ESMA published a Final Report containing the first set of technical standards required under the EU Green Bond Regulation. These technical standards relate to various aspects of the "external reviewer" regime for EU green bonds and provide the detail of the criteria by which such reviewers are assessed for compliance with certain standards such as senior management skill and experience, prudent management, independence and elimination of conflicts of interest. The technical standards also set out the standard forms and templates for the provision of registration information. Registered external reviewers will review issuers' pre- and post-issuance reports, including allocation of proceeds and impact reports. Between 21 December and 21 June 2026, a transitional period is in application during which firms may act as external reviewers of EU Green Bonds subject to their meeting certain criteria, ahead of full registration with ESMA. On 28 February 2025, ESMA published an updated list of those external reviewers that have met the notification requirement during the transitional period.

The draft technical standards have been submitted to the European Commission for approval, which is expected within the first half of 2025.

CSDR/Trade Settlement

Progress towards T+1 Settlement in the EU: Amendment of the CSDR

On 12 February, the European Commission published a legislative proposal to amend the Central Securities Depositories Regulation (CSDR) to give effect to the planned shortening of the settlement period for EU transactions in transferable securities from T+2 (settlement of securities on the second day after trade date) to T+1. This follows the agreement reached between ESMA, the European Central Bank and the European Commission in late 2024 to move to T+1 settlement from a recommended transition date of 11 October 2027. The proposal is also accompanied by a set of FAQs.

On 22 January 2025, ESMA announced in conjunction with the European Central Bank a new governance structure to facilitate the transition to the T+1 settlement cycle within the EU, which will oversee the operational, regulatory and technological aspects of the transition.

MiFID/MiFIR Bond and derivatives transparency

ESMA Final Report on bond transparency and data pricing under MiFIR review

On 16 December 2024, ESMA published its Final Report to the European Commission on required amendments to certain technical standards under MiFIR to take account of the MiFIR Review which made a series of amendments to MiFIR. The MiFIR amendments relate to improving pre-and post-trade transparency for non-equity securities, and the required changes to the technical standards concern so-called 'RTS 2' on bonds, structured finance products and emissions allowances. ESMA's Report proposes revised RTS 2 provisions based on feedback to an earlier consultation. The key changes made include those proposed to the definition of trading systems and pre-trade transparency waivers. There are other changes to the definition and characteristics of central limit order books and periodic auctions, and limited amendments to the pre-trade waiver regime. It also sets out proposed new RTS on the availability of information on a 'reasonable commercial basis', and a revised bond deferral regime based on new data analysis. A further report on derivatives transparency  is planned for later in 2025. The Report has been submitted to the European Commission for endorsement, and further consultations are planned during 2025 on the topic of derivatives transparency.

Anti-money laundering and counter-terrorist financing

EBA consults on technical standards under EU's new anti-money laundering and counter-terrorist financing framework

On 6 March 2025, the EBA published a Consultation Paper responding to a Call for Advice from the European Commission on the development of various technical standards required to supplement the new package of EU anti-money laundering and counter-terrorist financing (AML/CFT) legislation which was agreed in 2024. The new AML/CFT legislative package (which will not be fully operational and in effect until 2028, although the new AMLA is expected to begin to operate in 2025) comprises the following key measures:

• The 6th Anti Money Laundering Directive (AMLD6): this regulates the powers of national financial crime bodies and their interaction across borders, and requires the sharing of information such as that from central bank, property and beneficial ownership registers;

• The AML/CFT Regulation (AMLR): this sets out the key AML/CFT requirements that apply directly to financial institutions. Many of the provisions in the (current) AMLD5 have been transposed into this new Regulation, to ensure consistent application across all Member States;

• Regulation establishing the new EU Authority for  Anti-Money Laundering and Countering the Financing of Terrorism (AMLA): the new AMLA will have direct supervision powers over some entities, in a marked departure from the existing regime, and will coordinate national crime agencies, produce EU-wide risk assessments and develop standards and guidelines based on the legislative measures; and

• Regulation amending recast Regulation 2015/849: which sets out requirements that apply directly to payment services providers and cryptoassets service providers to ensure that transfers of funds and cryptoassets can be traced for AML/CFT purposes.

The EBA's proposed technical standards are central to the operation of the new EU AML/CFT regime and will shape how institutions and supervisors will comply with their obligations under the legislative package. Although a large number of delegated acts, technical standards and guidelines are required to supplement the legislation, the technical standards under this particular mandate relate to four key areas of the AML/CFT package:

• How the new AMLA will decide which institutions will be subject to direct supervision (this will take into account their cross-border activities and also the outcomes of the harmonised money laundering/terrorist financing risk assessment methodology);

• How the money laundering/terrorist financing risk associated with each institution is determined, by national supervisors applying a harmonised scoring methodology to arrive at consistent entity-level risk assessments which have comparable outcomes across all member states, and ease burdens for cross-border institutions;

• The extent and quality of information institutions will have to obtain as part of the customer due diligence (CDD) process under the new regime. The AMLR sets out a new, detailed framework for the performance of standard, simplified and enhanced due diligence, which represents a significant departure from current practices within the EU. To alleviate concerns around the prescriptive nature of the legislative requirements, the EBA's proposed technical standards adopt a principles-based approach which would allow each institution to choose the most appropriate approach provided it is in compliance with the legislation (such as listing the type and source of documents that may be obtained to conduct CDD but not listing specific documents); and

• The indicators and criteria to be taken into account when setting the level of pecuniary sanctions and/or administrative measures in relation to AML/CFT breaches, to ensure any breaches are assessed consistently and enforcement action is proportionate, dissuasive and effective.

Following a consultative period which ends on 6 June 2025, the EBA will submit the technical standards to the Commission on 31 October 2025.

Case Law

ECJ upholds asymmetrical non-exclusive jurisdiction clauses

On 27 February 2025, the European Court of Justice confirmed in relation to a case referred to it by the French Supreme Court (Lastre, Case C-537/23) that "asymmetrical" jurisdiction clauses are consistent with, and fall to be assessed for validity under, the Brussels Regulation (Recast) and not national law. However, such clauses are only valid where the clause can be interpreted as designating courts of EU member states or Lugano Convention states (namely, the EU, Denmark, Iceland, Norway and Switzerland).

Asymmetrical jurisdiction clauses are common in international finance and capital markets transactions and typically give finance parties the unilateral option to bring proceedings in the court specified in the documents' jurisdiction clause, and in any other competent court that could have jurisdiction (e.g. another jurisdiction where a debtor has assets). The borrower does not have that option and may only bring proceedings in the chosen court.

An earlier (much criticised) decision of the French Supreme Court had deemed asymmetric jurisdiction clauses invalid (because they do not enable all parties to identify the courts in which they can be sued), which created unhelpful uncertainty. The matter was referred to the ECJ for guidance. The ECJ's finding of validity where the jurisdiction clause can be interpreted as conferring jurisdiction "with sufficient certainty" on courts of (only) EU member states or Lugano Convention states (and not third countries) is helpful. It may however be restrictive, potentially leading transaction parties to favour the use of exclusive jurisdiction clauses, or to use more specific drafting around the jurisdictions in which proceedings may be brought.

Post-Brexit, the UK does not have the benefit of the Brussels Regulation (Recast) and Lugano Convention. As a result, there may be an indirect impact of this decision on asymmetric jurisdiction clauses in favour of English courts, which may not be recognised by the courts of an EU member state or Lugano Convention member. The UK's forthcoming implementation of the Hague Convention 2019 is expected to reduce some of these uncertainties, however, Hague deals with reciprocal recognition of judgments and does not replicate the key benefit of the Brussels Regulation (Recast) which is recognition of the parties' choice of courts for the resolution of disputes.

For further information, please see the Simmons & Simmons Insights Briefing on the case.

UK

UK prospectus regime

FCA consults on aligning retail and wholesale disclosure regimes for debt prospectuses

As part of its consultative measures in relation to the development of the UK's new public offer and admissions to trading regime ("POATR", the successor to the UK prospectus regime), the FCA has published new Consultation Paper 25/2 which sets out its proposals in relation to debt offerings to retail investors. These proposals cover, in summary:

• A single standard non-equity (i.e. debt) listing category based on the current 'wholesale' standard of disclosure;

• New guidance defining which low-denomination vanilla corporate bonds (below £100,000) issued by listed companies can be appropriate for the 'mass market' (it is however unlikely that this element will be directly relevant to structured products);

• New disclosure requirements for low-denomination bonds (with "additional, tailored disclosure requirements" still applying to asset-backed securities and those with a derivative element);

• An exemption to the use of prescribed accounting standards (currently allowed for wholesale debt securities) for all prospectuses relating to non-equity securities under the single disclosure standard;

• Changes to listing applications for 'further issuances' to reduce friction/regulatory intervention by removing the separate listing application requirement;

• Simplifying the listing framework by removing Listing Particulars as a type of listing admission document for admission to a regulated market or listed multilateral trading facility; and

• Consequential Handbook changes including transitional provisions.

Structured debt securities are expressly mentioned within the consultation paper (including in relation to the cross-over between the new "Consumer Composite Investments" regime and the POATR), however, few of the proposals are aimed at or appear to directly impact structured products.

We expect that many UKSPA members will find the proposals in CP 25/2 helpful in principle, subject to clarity around their application to structured debt securities. In particular, the proposal to introduce additional disclosure requirements for securities with more complex features (including those with a derivative element) would benefit from greater clarity in terms of the precise detail of the proposed scope and application of those requirements - and this point was noted in the UKSPA's response to the consultation, which was shared with the FCA on 14 March 2025 after consultation with members.

UK Consumer Duty

FCA outlines next steps on Consumer Duty

On 25 March 2025, the FCA released an Action Plan in Feedback Statement 25/2 setting out proposals for changes to simplify the Consumer Duty requirements and streamline its rules in several areas. The Feedback follows the FCA's earlier Call for Input on the Consumer Duty in July 2024. Key aspects of the FCA's proposals include:

• Making it easier to navigate regulations for consumer finance, investment and mortgage firms by retiring outdated guidance that is now covered by the Consumer Duty;

• Withdrawing hundreds of supervisory publications and updating requirements throughout the FCA's rules including the Client Assets and Training and Competence Sourcebooks, and providing greater clarity on the interaction between the rules on product governance and fair value;

• Reviewing Handbook definitions (including the complicated definitions of retail customers and small- and medium-sized enterprises which differ across sectors) to introduce greater consistency;

• Reviewing prescriptive disclosure rules to allow firms greater flexibility to tailor communications to customers' needs and preferences, taking account of online and digital transactions;

• Considering changes to the international application of FCA conduct rules for businesses with customers outside the UK; and

• Exploring options for reviewing the Senior Management, Systems and Controls Sourcebook which has expanded significantly over time and can be confusing.

Further input will be requested on specific aspects of the Action Plan and an update setting out further detail will be published in September 2025.

For more information, please see the Simmons & Simmons' latest Consumer Duty View.

FCA publishes findings of Review into firms' approaches to consumer support under the Consumer Duty

On 7 March 2025, the FCA published the findings of its multi-firm review into firms' approaches to the "consumer support" outcome under the Consumer Duty. The FCA wants firms to provide a level of support that meets customers' needs throughout their relationship with the firm, enabling the customer to realise the benefits of the products and services they buy and supporting them in pursuing their financial objectives. While the FCA found that most firms were considering how the support they provide meets their customers' needs, there are a number of areas for improvement:

• Aligning support processes to the target market: some firms appear not to have aligned their support processes around customer needs, while others lack a clear understanding of their target market, which may prevent them providing support that meets customers' needs, including those with characteristics of vulnerability.

• Making post-sale support as accessible and effective as pre-sale support: poor outcomes seen by the FCA include long wait times and inaccessible information. Firms should not disproportionately focus on pre-sales over after-sales support, including where services are provided by third parties.

• Embedding a culture that is in step with the Duty: some firms were unable to show they had taken substantive steps to drive cultural change in line with the Duty, and some failed to show that appropriate training and other measures were in place to ensure staff could fulfil their role in delivering good outcomes.

• Monitoring a broader range of outcomes about effective customer support: some firms relied on transactional metrics (such as contact rates and wait times), or took solely reactive approaches to monitoring by relying on customer feedback or complaints to identify issues. The FCA has seen mixed progress in relation to the implementation of effective management information oversight or information flows where the customer support function is outsourced to third-party firms.

The consumer support outcome is one of four key outcomes of the Consumer Duty, and should be viewed alongside the other outcomes and cross-cutting obligations of the Duty. The FCA's findings also set out examples of good practices taken by firms to minimise poor customer support outcomes, which include proactive understanding of customers' needs, the use of enhanced digital support, regular contact to build knowledge of individual customers, customer 'journey' mapping and staff training.

FCA publishes findings of Review of firms' treatment of customers in vulnerable circumstances

On 7 March 2025, the FCA published the findings of its review into firms' treatment of customers in vulnerable circumstances, which considered both the application of its existing Guidance for firms on the fair treatment of vulnerable customers (FG21/1) and the impact of the Consumer Duty on improving firms' practices in delivering good outcomes for vulnerable consumers. While many firms have taken positive action and made good progress in supporting customers in vulnerable circumstances, the FCA is aware that these consumers still report poor outcomes when compared with other consumers. Among the areas for improvement are:

• Outcomes monitoring: most firms were unable to show how they effectively monitor and act on outcomes for customers in vulnerable circumstances. This includes lack of clarity on what good outcomes are or how to measure them, and not escalating issues or making changes where needed.

• Appropriate support: some firms failed to support their staff in identifying customers in vulnerable circumstances, did not encourage customer disclosure and did not provide support promptly and with an appropriate level of care.

• Clear communications: firms have not been providing appropriate or accessible communication channels to customers in vulnerable circumstances, as well as a lack of testing of consumer understanding.

• Tailored training: most firms were unable to demonstrate how they have embedded vulnerable customers' needs into their products and service design, and there is a lack of training for staff involved in product and service design.

In light of its findings, the FCA has concluded that FG21/1 does not require updating as it remains appropriate and helpful alongside the requirements of the Consumer Duty. Firms are encouraged to make use of the FCA's practical examples of good practice, and the FCA will continue to engage with the industry to support continuous improvement.

FCA challenges government to provide clarity about risk appetite for consumer harm

Following up on a Letter dated 16 January 2025, FCA chief executive Nikhil Rathi made a Speech on 27 February in which he reiterated that the FCA is seeking a clear articulation from the UK government about the level of its risk appetite - particularly around consumer harm - to ensure the FCA's approach is aligned with that of government. Encouraging this clarity on risk appetite is thought to precede action by the FCA to further relax the Consumer Duty following a post-implementation review of the Duty during 2025. However, it is widely accepted that changes will not represent a complete re-write of the Consumer Duty Rules, but will likely be targeted, focusing on areas where the Duty is seen as disproportionate. These include removing outdated guidance and overlapping rules in mortgages, simplifying rules on responsible lending and amending the rules on financial advertising.

The FCA has already removed the requirement for firms to have a Consumer Duty Champion, and the government has announced the consolidation of the Payment Services Regulator into the FCA.

Product Intervention

Final UK Short Selling Regulations published (S.I. 2025 No. 29)

On 13 January 2025, the final version of the new UK Short Selling Regulations 2025 and accompanying Explanatory Notes were published (these had previously been published in draft form at the end of 2024). The Regulations contain high-level rules which establish a new UK framework for short selling to replace the assimilated law version of the (EU) Short Selling Regulation, and create certain "designated activities" for which the FCA will have rulemaking and intervention powers. The designated activities are: entering into a short sale of an admitted share; and entering into any transaction other than a short sale of an admitted share, where an effect of the transaction is to confer a financial advantage on the person entering into that transaction in the event of a decrease in the price or value of an admitted share.

Certain aspects of the Regulations, including those allowing the FCA to make rules, take effect on the date of publication. However, the Regulations will not take full effect until the existing regime is repealed under the Financial Services and Markets Act 2000.

FCA to consult on new short selling rules in Q3 2025

Further to publication of the final UK Short Selling Regulations in January 2025, on 12 February the FCA updated its webpage on the notification and disclosure of net short positions, to confirm that it will consult on the new rules implementing the new UK short selling regime during the third quarter of 2025. Certain aspects of the Regulation will only be implemented (such as the requirement for the FCA to publish aggregated net short positions by issuer) once the FCA has finalised the new rules and has made various technical and operational changes.

UK CSDR/Trade Settlement

Progress towards T+1 Settlement in the UK

The UK's Accelerated Settlement Taskforce's Technical Group (ASTG) has recommended that the UK's transition to a T+1 settlement cycle take place on the same date as the EU transition (11 October 2027) and has released an implementation plan which makes several recommendations, including: that the first day of UK cash securities settlement should be 11 October 2027, effected through amendments to the UK Central Securities Depositories Regulation (UK CSDR); the scope of changes that are required to UK CSDR to facilitate the transition, which will be implemented by Statutory Instrument; and a proposed UK T+1 Code of Conduct (UK-TCC) which identifies the scope of T+1 in terms of instruments, transactions and exemptions, a timetable of recommended actions and expected behaviours of UK market participants, and 12 critical actions in four business areas that the ASTG considers must be implemented by market participants to ensure a sustainable transition. Recommended next steps for various market participants through 2025-2027 are also set out (these will include changes to CSD rulebooks, trading documentation and industry guidelines).

HM Treasury's Response to the ASTG implementation plan accepts all of the recommendations and confirms that it will legislate to make T+1 the standard settlement cycle in the UK from 11 October 2027 (agreeing that the alignment of the transition date with the EU is highly desirable). Also, the ASTG should continue to oversee implementation of the recommendations until T+1 has successfully been delivered. The FCA has a new T+1 Webpage which sets out its expectations for regulated entities in preparing for and delivering the T+1 transition.

Anti-money laundering

FCA Report: Assessing and reducing the risk of money laundering through the markets (MLTM)

On 23 January 2025, the FCA published this Report which updates its analysis of MLTM risk following an earlier Thematic Review in 2019. MLTM risk is defined as the use of capital markets to move criminally generated cash so that it appears legitimately generated. The FCA's research was based on detailed firm reviews at wholesale brokers (although its findings are relevant for other firms across wider markets), to understand how they are approaching the following areas: business-wide and customer risk assessments (BWRA and CRA); know your customer (KYC) and customer due diligence checks (CDD); governance and oversight; transaction monitoring (TM); investigations and suspicious activity reports (SARs); and training.

Finding that the risk of MLTM is continually evolving, the FCA has seen good practice and progress in financial crime systems and controls across firms of varying sizes. However, more focus is needed to mitigate risks and respond to key challenges including transaction monitoring, firms' knowledge of the UK Financial Intelligence Unit (UKFIU) SAR glossary codes, information sharing and detailed documentation of CRA methods. The FCA expects firms to have robust financial crime systems and controls at each stage of the customer and transaction journey, to ensure there are no "weak links" that expose the transaction and its participants to financial crime.

Firms need to continue to review their systems, controls, MLTM awareness and training. Detailed areas of focus for firms include:

• Considering MLTM risk and reflecting this in their documentation as well as BWRA and systems and controls;

• Ensuring they have firm- and role-specific MLTM staff training and awareness  in place;

• Considering how best to use TM as part of an integrated process of financial crime systems and controls, incorporating tailored TM controls and alerts, and ensuring collaboration between teams;

• Ensuring relevant teams are aware of and using appropriately the UKFIU MLTMs SAR glossary code and are submitting high-quality SAR reporting; and

• Reviewing the Economic Crime and Corporate Transparency Act 2023 and considering how they can share information to counter money laundering, raise awareness and intelligence, and reduce MLTM risk.

The FCA will continue to work with firms to ensure they are considering MLTM risks and responding effectively to risks and threats, and innovating to develop tailored solutions for the capital markets.

MiFID Org Regulation

Publication of the MiFID Organisational Regulation Draft Statutory Instrument and Policy Note

On 18 March, HM Treasury published a near-final version of the draft Statutory Instrument that restates in UK legislation those aspects of the EU-derived MiFID Organisational Regulation ("MiFID Org Regulation") that are being maintained in UK legislation, and a Policy Note that explains the UK's approach to this legislation post-Brexit. The MiFID Org Regulation sets out the organisational and operating requirements as well as detailed regulatory requirements including conduct rules and systems and controls obligations for investment firms. The wide scope of rules covers requirements including client categorisation, best execution, research, conflicts of interest, outsourcing, compliance and internal audit functions.

The draft SI restates the key definitions of the MiFID Org Regulation that are being retained in the UK, without material policy change. The definitions are the key aspect of the legislation being retained as they set the regulatory perimeter in relation to defining the financial instruments, firms and activities that are in scope, the exclusion of certain contracts from the legislation's scope, and definitions of various trading techniques. The SI makes related amendments to the Regulated Activities Order under the Financial Services and Markets Act 2023 (FSMA 2023) and the Recognition Requirements Regulations to ensure consistent definitions are contained within the relevant UK legislation.

The FCA's consultation on the firm-facing Handbook Rules replacing the EU-derived MiFID Org Regulation has recently closed, and those Rules, once finalised (which is expected in the second half of 2025, along with PRA Rules that have not yet been consulted upon), will complete the UK's post-Brexit MiFID Org regulatory regime for investment firms, providing the firm-facing rules that are underpinned by this legislation. The existing EU-derived MiFID Org Regulation will be repealed on a future date by a forthcoming Commencement Order to be made under FSMA 2023, and the new legislation and FCA/PRA Rules are expected to take effect on the same date.

Trade Association Updates

ICMA

ICMA publishes commentary and recommendations for the simplification of EU sustainable finance legislation

In February 2025, the International Capital Market Association (ICMA) published a Paper setting out commentary and recommendations for the simplification of EU legislation in the area of sustainable finance (including the EU Taxonomy, data requirements under the Corporate Sustainability Reporting Directive and reporting under the Sustainable Finance Disclosure Regulation), with a view to enhancing its usability and effectiveness.

ICMA's recommendations represent a wide range of views of capital markets participants, policymakers and other stakeholders whose views focus on the narrow focus of the Taxonomy resulting in the restriction of capital flows, the multiplicity of data and reporting requirements and the complexity of the framework. Recommendations for action centre around limiting mandatory reporting obligations to large listed companies, introducing greater flexibility, reducing the number of required disclosures and data points, and refocusing materiality assessments.

The European Commission has subsequently issued its 'Omnibus' proposals for the simplification of EU sustainable finance legislation, as noted above.

ISDA

ISDA publishes Version 2.0 of the Equity Derivatives Definitions

On 21 January 2025, the International Swaps and Derivatives Association (ISDA) announced the publication of the second version of the fully digital edition of the 2002 ISDA Equity Derivatives Definitions (Versionable Edition) along with confirmation templates. The updated version of the online definitions includes provisions for documenting transactions with time-weighted average price or volume-weighted average price features, futures price valuation in respect of share transactions and benchmark provisions in respect of an index. The digitisation of the 2002 Definitions allows them to be amended and restated in their entirety every time an update is needed, reducing the need for bilateral amendments.

For further information, please see this Simmons & Simmons article introducing the new Definitions.

For further information on any of the topics covered in this Bulletin, please contact the authors, or your usual Simmons & Simmons structured products contact.