ARTICLE
July 1, 2026
Read time: 4 min
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As part of London Hot Topics 2026, Christopher Avellaneda and Karen Butler explored the regulatory developments expected to shape the investment management industry over the coming year, including valuations, conflicts of interest, sanctions, cryptoassets and retailisation.
While regulatory priorities continue to evolve across jurisdictions, one theme emerged consistently throughout the discussion: governance remains firmly at the centre of regulatory expectations.
As regulators increasingly focus on outcomes rather than technical compliance alone, investment managers are being challenged to demonstrate not only that policies exist, but that they operate effectively in practice.
A changing regulatory landscape
Across both the UK and US, regulators are signalling a desire to simplify certain aspects of the regulatory framework.
In the UK, proposed reforms to the Alternative Investment Fund Manager regime, changes to the Senior Managers and Certification Regime and adjustments to the short selling framework all point towards a more proportionate and streamlined approach.
Similarly, in the United States, regulators have indicated a willingness to reduce reliance on regulation through enforcement and focus resources on areas where investor harm is most likely to occur.
For managers, these developments are broadly positive. However, they should not be mistaken for a reduction in regulatory expectations.
Valuations remain under the spotlight
One of the clearest themes to emerge from the discussion was the continued focus on valuations.
As private markets continue to grow and managers increasingly invest in illiquid and difficult-to-value assets, regulators are paying close attention to valuation methodologies, governance arrangements and conflicts management.
Firms should ensure that valuation processes are appropriately documented, subject to challenge and supported by robust governance structures.
The ability to demonstrate independent oversight and effective decision-making is likely to become increasingly important in both regulatory reviews and investor due diligence processes.
Governance and conflicts continue to matter
Regulators are placing growing emphasis on how firms identify, manage and monitor conflicts of interest.
This extends beyond traditional conflict management frameworks and increasingly encompasses areas such as allocation decisions, expense allocations, valuation inputs and broader governance arrangements.
The discussion highlighted that firms should avoid relying solely on disclosure as a solution. Instead, regulators increasingly expect managers to demonstrate that conflicts are actively managed through practical governance processes and oversight mechanisms.
As investor expectations continue to evolve, strong governance is becoming both a regulatory and commercial imperative.
New opportunities bring new challenges
The discussion also explored several areas of rapid market evolution, including cryptoassets, tokenisation and retailisation.
Regulators in both the UK and US continue to develop frameworks designed to support innovation while maintaining appropriate investor protections.
For managers, these developments create significant opportunities but also introduce new operational, compliance and governance considerations.
Whether exploring digital assets, tokenised products or broader access to private markets, firms will need to ensure that systems, controls and oversight frameworks evolve alongside their strategies.
Sanctions remain a critical consideration
Geopolitical developments continue to create challenges for globally active investment managers.
The discussion highlighted the ongoing complexity of sanctions regimes relating to Russia, Venezuela and China, as well as the practical implications for fund operations, investor onboarding, portfolio management and transaction execution.
Managers should continue to assess sanctions issues early in the investment lifecycle and remain mindful of the increasingly global nature of sanctions compliance.
Failure to identify issues at an early stage can result in delays, operational challenges and unexpected restrictions on investment activity.
Looking ahead
While the regulatory landscape continues to evolve, one message remains clear: governance matters.
Managers are operating in an environment where regulators, investors and counterparties increasingly expect transparency, robust oversight and evidence of effective decision-making.
Those firms that invest in governance, valuation frameworks and conflict management processes are likely to be best positioned to navigate future regulatory developments while continuing to pursue growth opportunities.
Continue the conversation
If you would like to discuss any of the issues highlighted above, please reach out to Christopher S. Avellaneda, Karen Butler or your usual McDermott contact.
