FCA PS26/17 — Enhancing fund liquidity risk management

Tag: S-2026-08-fca-ps26-17-fund-liquidity Type: report (policy statement — final rules) Author(s): Financial Conduct Authority (FCA) Date of source: 2026-08 (cover dated “August 2026”; no specific day printed — month-only S-tag used) Date ingested: 2026-08-18 Authority weight: high — the FCA’s own final policy statement with made rules, retrieved in full via direct WebFetch of the PS26/17 PDF. Raw file: S-2026-08-fca-ps26-17-fund-liquidity.md. Source URL: fca.org.uk/publication/policy/ps26-17.pdf.

What it claims

In August 2026 the FCA published PS26/17 “Enhancing fund liquidity risk management”, finalising the rules consulted on in CP25/38 (consultation closed 23 February 2026; 9 responses). The reforms apply to authorised fund managers (AFMs) of UK UCITS schemes and non-UCITS retail schemes (NURS), MiFID managers to whom portfolio management is delegated, and depositaries of authorised funds. They implement, in a UK-tailored way, IOSCO’s May 2025 liquidity-risk-management recommendations and the underlying FSB 2023 recommendations on liquidity mismatch in open-ended funds.

The final package does three things. First, it promotes effective use of anti-dilution tools (ADTs) — swing pricing or a dilution levy for single-priced funds, and (for dual-priced funds) the AFM’s ability to allocate transaction costs and provide for large deals — so that subscribing and redeeming investors bear their own transaction costs rather than diluting remaining investors. Following feedback, the FCA clarified that “vertical slicing” (pro-rata apportionment of scheme property) is not the expected execution method for every transaction, and modified how dual pricing is treated as an anti-dilution mechanism. Second, it strengthens how AFMs assess and monitor the ongoing liquidity risk of transferable securities, removing overreliance on the fact that a security is admitted to trading on an exchange (the “listed asset presumption”); after feedback, the derogation from the eligible-market test for recently issued securities is retained but reduced to 20 business days post-issuance (from one year). Third, it introduces new Handbook guidance on liquidity stress testing — an updated UK version of the ESMA LST guidelines — plus a good-practice annex on liquidity risk management for UCITS schemes and NURS.

The overriding principle, preserved from consultation, is that liquidity risk management remains the ultimate responsibility of the AFM. Beyond ADT calibration, the guidance requires firms to “embed strong governance, oversight and challenge by senior management across their liquidity risk management more broadly, including regular review of how these tools are used and calibrated in practice”, assuring themselves that ADT use is in all unitholders’ best interests. Compliance monitoring will draw on data from the separate Fund Reporting for Asset Management Entities (FRAME) reporting reforms, though firms will not be required to report detailed quantitative tool-calibration metrics (e.g. swing factors, dilution-levy amounts).

The new rules and guidance come into force on 1 February 2027, with transitional provisions applying to some rules until 1 August 2027 (including a transitional provision for the stress-testing requirements). The FCA flagged that it will soon consult separately on wider liquidity proposals for authorised retail funds investing in inherently illiquid assets (predominantly daily-dealt property funds), covering notice periods, deferrals and minor Long Term Asset Fund (LTAF) regime changes. The reforms support the FCA’s market-integrity, consumer-protection and competition objectives; UK AUM now exceeds £16.5 trillion.

Notable quotes

“The new rules and guidance will come into force on 1 February 2027. However, transitional provisions will apply to some rules until 1 August 2027.” — FCA, PS26/17, §1.44–1.45

“Beyond the calibration of anti-dilution tools, our guidance makes clear that firms must embed strong governance, oversight and challenge by senior management across their liquidity risk management more broadly, including regular review of how these tools are used and calibrated in practice.” — FCA, PS26/17, §1.26

“The enhancements to the UK’s regulatory framework for liquidity risk management are based on the principle that AFMs remain responsible for an individual fund’s liquidity risk management choices.” — FCA, PS26/17, §1.15

What’s speculative vs. asserted

• Asserted (primary — final rules): the August 2026 publication of PS26/17; the three reform strands (ADT promotion; strengthened transferable-securities liquidity assessment / removal of the listed-asset presumption reduced to a 20-business-day derogation; new liquidity-stress-testing guidance and good-practice annex); scope (UCITS schemes, NURS, delegated MiFID managers, depositaries); the AFM-responsibility principle and the §1.26 senior-management governance expectation; the 1 February 2027 in-force date and 1 August 2027 transitional cut-off; 9 consultation responses; UK AUM > £16.5 trillion.
• Signposted future action, not yet consulted/made: the “soon” separate consultation on illiquid / daily-dealt property funds (notice periods, deferrals, LTAF changes). Treat as a forward pointer, not a finalised measure.
• Not AI/data governance: despite a data-monitoring hook (FRAME reporting), this is prudential/conduct fund-liquidity regulation; AI is not in scope. Service-line mapping (GFD, RRE) is the ingesting agent’s assessment, stated explicitly, not a claim of the source.

Topics this feeds

• FCA — Financial Conduct Authority — a further concrete FCA final policy statement in the vault’s FCA-tracking; governance-relevant chiefly through the §1.26 senior-management governance/oversight/challenge expectation over a firm’s liquidity risk framework, and as a datable implementation obligation (in force 1 Feb 2027).
• Consumer Duty — secondary hook: the reforms advance the FCA’s consumer-protection objective (fair allocation of transaction costs; avoiding investors being trapped by liquidity shortfalls), consistent with Consumer Duty outcomes, though PS26/17 is not itself a Consumer Duty instrument.
• Suggested future page (only if a second source arrives): Fund liquidity risk management / open-ended fund LMTs — promote if the forthcoming illiquid/property-fund consultation or the IOSCO/FSB workstream generates a second in-scope source.

Open questions raised

• How should an AFM evidence the §1.26 “strong governance, oversight and challenge by senior management” over liquidity risk management — what artefacts (board/committee review of ADT calibration, LST results, documented challenge) would satisfy the FCA? (Direct governance-assurance hook, though outside Paul’s core AI/data niche.)
• Will the forthcoming illiquid / daily-dealt property-fund consultation (notice periods, deferrals, LTAF changes) introduce materially heavier governance and operational-readiness demands than PS26/17?
• How will the FRAME reporting data actually be used to supervise ADT availability and use in practice, given firms need not report detailed calibration metrics?