For UK private equity professionals, due diligence in 2026 is defined by a dynamic and tightening regulatory environment. This guide outlines the new rules you must navigate, providing specific timelines and quantitative data to inform your investment processes.
The New Regulatory Framework for Investments
Several major regulatory initiatives are reshaping the fundamental rules for client engagement and fund management.
- Updated Client Categorisation Rules (FCA Consultation CP25/36): To reduce complexity and better serve professional clients, the FCA has proposed significant changes.
- Removal of the Quantitative Test: The current financial thresholds for classifying an “elective professional client” will be replaced by a robust enhanced qualitative assessment of expertise, experience, and knowledge.
- New ‘Wealth-Only’ Exception: Individuals with investable assets of at least £10 million can be categorised as professional clients without the qualitative test, subject to strict safeguards and informed consent.
- Timeline: The consultation closes on 2 February 2026, with final rules expected later in the year.
Fund Liquidity & Regulatory Reviews: The FCA is actively consulting on enhancing liquidity risk management for funds, with rules for Alternative Investment Fund Managers (AIFMs) expected in H2 2026. Concurrently, a full review to replace the EU-derived AIFMD with a UK-tailored framework is underway, with draft legislation expected in early 2026.
