6 Financial services regulation trends emerging from 2024

There is never a static year in financial services regulation and 2024 was no exception. The drip feed of new regulation continued at a steady speed, spurred on, in part, by the pace of change brought about by digitalisation. In political terms, it was also a very busy year with many jurisdictions holding elections, the outcome of which will shape the direction and pace of regulation going into 2025.

In this round up we highlight just a few of the emerging trends from 2024 of relevance to our aosphere online legal subscription services that focus on cross-border distribution topics and look ahead to what 2025 is likely to bring.

1. Smarter UK regulation?

Despite the interruption of the election, 2024 saw a number of regulatory developments in the UK not only in relation to the replacement of retained EU laws and advancement of its “smarter regulatory framework” for financial services tailored to the UK, but also the introduction of a crypto asset roadmap peppered with policy papers planned for next year. 

Some other developments of note were: 

• in March, the HM Treasury published a policy paper flagging the next areas of focus for regulatory reform extending to the AIFMD, UCITS Directive and MiFID (particularly the organisational requirements and operating conditions for investment firms)      
• the FCA’s new regulatory “gateway” for firms that approve financial promotions came into force in February
• at the end of September, the overseas fund regime (OFR) opened for new applications.  The OFR creates a new streamlined process for funds domiciled outside the UK (in jurisdictions deemed to be equivalent by the UK government) to be marketed and sold to UK investors. The UK government has so far recognised EEA UCITS (except for money market funds) as equivalent.  For those stand-alone UCITS in the temporary permissions marketing regime (which was extended until end of 2026), landing slots were released in October 2024 for applications for recognition under the OFR

2. Tightening up of scope of reverse enquiry in the EU?

Following an earlier consultation, on 17 December ESMA issued final guidelines aimed at addressing supervisory practice with regard to detecting and preventing the circumvention of the application of the Markets in Crypto-Assets Regulation (MiCA) to third country firms in the context of reverse solicitation.

The concept of third country firms having the freedom to provide requested services at the exclusive initiative of the client is not a new one in EU legislation (as it is already recognised in the context of MiFID II and AIFMD and has been built into CRD VI). In the context of MiCA, ESMA has determined that the concept should be interpreted very narrowly and is to be regarded as the exception, meaning that the area exempt from MiCA authorisation in which third country firms can operate based on reverse solicitation is significantly restricted.  

Whilst ESMA’s report that accompanied the guidelines confirms that the guidelines focus exclusively on the MiCA reverse solicitation regime, the guidelines do indicate a direction of travel in terms of what the European supervisory authorities may tolerate in the future with regard to reverse solicitation practices, begging the question as to whether we will see a similar tightening of approach to permitted reverse enquiries beyond the scope of MiCA.

3. US – we watch and wait

In the US, the election is heralding a change in administration and with it a new chairperson of the SEC. Whilst we watch this space for the new regulatory agenda (particularly in relation to the regulation of crypto), we reflect on what has been a fairly tumultuous year featuring key court decisions on the SEC’s Private Fund Adviser Rule and the SEC’s Dealer Rule.  

• In June, the US Court of Appeals for the Fifth Circuit ruled that the SEC’s Private Fund Adviser Rule exceeded the SEC’s statutory authority and was therefore unauthorised. The Private Fund Adviser Rule had been adopted in August 2023 and added numerous obligations to private fund advisers. On 8 November 2024, the SEC adopted technical amendments to various rules under the Advisers Act to reflect this ruling
• In November, the US District Court for the Northern District of Texas ruled that the SEC’s proposed Dealer Rule exceeded the SEC’s statutory authority and was therefore unauthorised. The Dealer Rule had been adopted by the SEC in February 2024 and amended the definitions of securities ‘dealer’ and ‘government securities dealer’ requiring entities undertaking certain dealer activities to register with the SEC.  We are watching to see how the SEC will respond  

4. Developing crypto ecosystems

2024 was also a significant year in terms of the proactive steps taken by a number of regulators across the globe to begin building clear regulatory boundaries for the evolving crypto ecosystem. In the EU, MiCA, the implementation of which was staggered across June and December, represents a significant milestone for the regulation of the crypto sector in the EU. MiCA introduces a pan-European financial services licensing and supervisory regime for issuers of crypto assets and crypto asset service providers in relation to a wide range of crypto assets. Many Member States have been proactively taking measures to ensure their national legislation aligns with MiCA.  We have been busy tracking Member States responses to MiCA and, in this article, we highlight various approaches Member States are taking, as well as certain other interesting aspects which have or are being introduced as part of different Member State proposals/new legislation. 

Outside of the EU, regulators have been moving at different speeds in their response as to how best to regulate crypto assets and related services and continue to grapple with the ever-challenging questions of when and how to intervene and what the regulatory perimeter should be for domestic and cross-border providers. Whilst strides have been taken this year to harmonise the European landscape, we continue to see how differing answers to these questions fragment the regulatory landscape elsewhere in the world.

In the Middle East, jurisdictions such as the DIFC, ADGM and the UAE are moving quickly. We note, in particular, the marketing regulations that were published by the Dubai VARA in the autumn – these contained lots of practical examples and key considerations for firms undertaking marketing activities relating to virtual assets. Although virtual asset specific, there was a lot of information that was useful for firms carrying on cross-border marketing in the UAE more generally. Elsewhere, jurisdictions such as Australia are taking more of a watch and wait approach in terms of the regulation of crypto assets although consultations issued in December indicate that the pace of change may pick up going into 2025.

5. Global focus on finfluencers

A theme that has continued throughout 2024 is increased regulator scrutiny of the activities of finfluencers, particularly those operating cross-jurisdictionally through digital platforms. In addition to a November 2024 IOSCO consultation report which proposes a number of good practices for regulators, finfluencers and the firms that use them, several regulators from across the globe have issued guidelines and codes of conduct imploring both finfluencers and consumers to be alive to the risks and adopt good practices to prioritise investor protection. Read our Focus on Finfluencers article for more information and analysis.

6. Enforcement actions on the up

The continuous evolution of regulatory landscapes and increase in enforcement actions often go hand in hand and throughout 2024 we have seen regulators becoming increasingly open about their approaches to enforcement and areas of focus (although examples of public enforcement actions remain relatively rare). Particularly in the crypto assets space, regulators are grappling with trying to strike the right balance between providing adequate investor protection whilst allowing the development of new technologies and flexibility as regulatory frameworks develop.  We have seen a variety of approaches deployed ranging from imposing penalties, issuing public warnings and blacklisting. Examples of recent actions across the globe can be found in our Fresh Look at Sanctions article.

Coming down the track

As is traditional for this time of year, whilst reflecting on the year that has been, we are keeping a watchful eye on what is coming down the track in 2025, poised to be another transformative year.

Here are just a few of the developments we expect: 

• an increase in AIFMD II implementation activities across EU Member States which have until 16 April 2026 to transpose the directive into their national laws. One of the key impacts on cross-border distribution activities will be an increase in reporting requirements particularly on delegation and additional investor disclosures
• EU Member States beginning to take action to transpose CRD VI into national laws (which is required to be done by 10 January 2026). Although the prohibition on the provision of cross-border banking services doesn’t begin to apply until 11 January 2027, affected third country institutions will need to begin to assess and evaluate the impact of the new regime on their business lines and take steps to prepare for how they will provide services in the EU going forward, whether that be by benefiting from exemptions under the regime, scaling back activity or restructuring into EU branches or subsidiaries
• the UK’s new public offer and admissions to trading regime and new retail disclosure regime (including a replacement for PRIIPs) coming into play in the first half of 2025
• the GCC fund passporting framework that was announced in November taking effect which will allow funds to be registered and promoted across the GCC states in a streamlined manner
• progression of ASIC’s proposed new exemptions for foreign financial service providers (FFSP) under the Treasury Laws Amendment (Measures for Future Bills) Bill 2023 through Parliament, intended to implement a clear and comprehensive exemption regime for FFSPs, resolving long-standing uncertainty about the available exemptions for foreign firms providing financial services in Australia.  In the meantime, the current transitional relief for the existing FFSP exemptions has been extended until 31 March 2026
• the continued influence of ESG considerations on the global financial and regulatory landscape as the regulators in key financial hubs implement national sustainable finance strategies, conduct data collection exercises and increase their monitoring of disclosure requirements