RegsRadar Q3 2026

Regulators are increasingly scrutinising how governance and delegation operate in practice, using higher quality data and more visible onsite oversight to drive targeted supervisory action.

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The theme running through our Q3 update is how firms are being nudged towards more resilient models of delegation and fund structuring, using “intelligent” oversight that uses high-quality, normalised data to spot issues early rather than after the fact.

We explore the Central Bank of Ireland’s delegation framework review and the growing expectation that governance will be assessed by how it operates under stress, not just on paper. We also look at ESMA’s ongoing push for reporting harmonisation, the CSSF’s fresh work on conflicts of interest, the potential for segregated liability compartments in unregulated funds and the Financial Conduct Authority (FCA)’s proposed new UK asset management framework.

Here’s our round-up of the biggest regulatory updates for the third quarter of 2026.

CBI delegation framework review

The Central Bank of Ireland’s July 2026 review of delegation marks an important evolution in regulatory expectations rather than a challenge to the delegation model itself. It concludes that delegation remains fundamental to the European funds industry.

The broader question it raises is over how effectively governance operates in practice, rather than simply what structures are in place. For managers and delegates, this means greater emphasis on demonstrable oversight, accountability and resilience.

Effective governance increasingly depends on timely, reliable and connected information. The Central Bank identified fragmented systems, manual reconciliations and weak contingency planning as areas requiring improvement.

The principle is essentially ‘better data’ rather than ‘more data’. If firms collect information intelligently and connect it effectively, they can identify areas of risk without creating unnecessary layers of reporting. They can therefore scale their business and be a much more effective overseer of delegates.

The review also points to increased emphasis on onsite due diligence, although the level of due diligence itself is not necessarily expected to increase. What matters more is being able to demonstrate that oversight is effective and that governance arrangements work when tested.

In the meantime, its wider significance extends beyond Ireland. Demonstrable oversight, independent governance, stronger accountability, enhanced data capabilities and resilience are becoming common supervisory expectations across Europe, regardless of jurisdiction.

ESMA pushing for supervisory convergence

ESMA continues to push for supervisory convergence and reporting harmonisation, notably through the new UCITS reporting standards expected in the autumn. These will require more detailed information on liquidity, risk management, delegation arrangements and investment markets and instruments.

Implementation will require operational work, but it also creates an opportunity to move away from ad hoc reporting towards consolidated and flexible reporting capabilities. Standardised data requirements could reduce one-off regulatory requests and allow firms to use regulatory data more proactively across their businesses.

UCITS is already a fully harmonised European framework, making it a logical vehicle for greater standardisation across markets. However, we sense caution around ESMA taking a wider supervisory role, with a preference for harmonisation where it creates a level playing field while retaining the expertise of national regulators such as those in Ireland and Luxembourg. Amendments in the European Parliament are also not in favour of ESMA becoming a single supervisor.

This sits within a wider macro dynamic amid a growing focus on European champions. The question is therefore how far supervisory convergence can go while maintaining the national expertise that remains important to Europe’s funds industry.

ESMA’s Common Supervisory Action is also looking at the risk management function, including whether firms have genuinely independent risk functions, adequate expertise, sufficient authority, appropriate staffing and effective oversight by senior management. Unlike previous thematic reviews, the focus is directly on whether the function can operate effectively and independently.

Conflicts of interest: CSSF identifies key areas of focus

The CSSF’s fresh work on conflicts of interest underscores the growing regulatory focus on how governance operates in practice, particularly where delegation arrangements are in place.

The CSSF has identified specific conflicts that can arise where business partners or initiators are appointed as investment advisers or portfolio managers.

For instance, when an initiator acts as portfolio manager, it must have both the capacity and the willingness to operate independent controls. If the investment manager retains portfolio management, there is a risk the IFM follows the initiator’s guidance rather than acting independently in the fund’s best interests.

Another concern is that business partners or initiators may seek to influence asset valuations, potentially affecting the independence of the valuation process and the IFM’s ability to act in investors’ best interests.

The CSSF is also looking at white-label businesses, where conflicts may arise from the allocation of responsibilities particularly where individuals from business partners or initiators hold roles, functions, or positions within reporting lines that give rise to conflicts.

The overall message is that firms need to be able to provide detailed explanations and evidence of how conflicts are identified, managed and where relevant, disclosed to investors.

Segregated liability compartments for unregulated funds

A proposed change to Luxembourg’s fund framework could provide greater flexibility for private capital managers using Société en Commandite Simple (SCS) and Société en Commandite Spéciale (SCSp) structures.

Standard SCSps are widely used in the world of private equity and infrastructure funds. However, an unregulated SCSp cannot create statutory “umbrella sub-funds” with ring-fenced liabilities. Managers seeking segregated compartments typically need to use structures such as a RAIF, SIF, SICAR or Part II Fund, all of which come with additional product-law requirements.

The new proposal introduces a new Article 28bis into the Luxembourg AIFM Law, allowing eligible SCS and SCSp AIFs to create statutory segregated compartments. Each compartment would have legally separated assets, liabilities, investors and creditors, with creditors of one compartment generally having recourse only to that compartment’s assets.

A single SCSp could therefore contain multiple compartments representing different strategies, vintages, parallel vehicles, co-investment sleeves or separate investor groups within one legal entity. Individual compartments could also be wound up independently, while cross-investment between compartments would be possible subject to safeguards.

For our clients, this could create a compelling alternative to a RAIF for private capital managers, infrastructure managers, real estate fund sponsors and multi-vintage private equity programmes.

By combining the contractual flexibility and tax transparency of the SCSp, with compartmentalisation benefits traditionally associated with RAIFs, SIFs and other product-law structures, it’s arguably the most significant SCSp enhancement for a long time.

If the proposal – still subject to Luxembourg’s parliamentary process – goes ahead in its current status, managers that currently use separate SCSp vehicles or RAIF umbrellas for segregated liability might achieve the same outcome through a single unregulated SCSp platform managed by an authorised AIFM.

UK asset management regulation

Finally, in mid-July the FCA launched the biggest overhaul of the UK’s asset management framework since Brexit, consulting on an entirely new UK AIFM regime alongside HM Treasury legislation.

Rather than simply retaining inherited EU rules, the FCA wants a regime that is more proportionate, simpler and tailored to different sizes of manager. It has also proposed simplifying remuneration requirements and overhauling fund reporting.

The UK regulator has a range of statutory objectives, including promoting the global competitiveness of the UK financial sector. The jury is out, however, over whether the new framework ultimately drives greater divergence or alignment with European regulation.

For the market, the key issue will be how a simpler and more proportionate UK regime works alongside the requirements faced by managers operating in Europe.

The overall emerging message from Q3 is that resilient businesses will be those that can evidence real‑world effectiveness in governance, risk management and data‑driven supervision across multiple jurisdictions.

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