PS26/17: Enhancing fund liquidity risk management

Read PS26/17 (PDF)[2] 

Why we are doing this

We're finalising new rules and guidance, making targeted improvements to the liquidity risk management framework for authorised fund managers (AFMs) of UK Undertakings for Collective Investment in Transferable Securities (UCITS) schemes and non-UCITS retail schemes (NURS). The changes promote the effective use of anti-dilution tools, clarify good practice for AFMs’ assessment of the liquidity of securities held in funds, and introduce new guidance on stress testing. We want retail investors to keep accessing a broad range of investment opportunities, while retaining protection from the risks that can arise when funds invest in less liquid assets.

Who this is for

This Policy Statement applies to: 

• AFMs of UCITS schemes and NURS.
• MiFID investment managers, where the AFM has delegated the portfolio management function of a UCITS scheme or NURS to them.  
• Depositaries of authorised funds.

It may also be of interest to:

• Investment platforms and other fund distributors.
• Investors in authorised funds.  
• Financial advisers and investment consultants.

Next steps

The new rules and guidance come into force on 1 February 2027. Transitional provisions apply to some rules until 1 August 2027, giving firms more time to update fund prospectuses and comply with the shorter derogation period for the eligible market test for recently issued securities.

We will soon consult separately on wider liquidity proposals for retail funds invested in inherently illiquid assets, such as property funds.   

Background

In May 2025, the International Organization of Securities Commissions[3] (IOSCO) published updated recommendations on liquidity risk management for funds, reflecting the Financial Stability Board's (FSB) work on structural vulnerabilities in open-ended funds. We helped develop these recommendations and reviewed our own rules in response.

We consulted on proposals in CP25/38[4]. We received 9 responses. Respondents were generally supportive of our approach, including our decision that AFMs remain ultimately responsible for a fund's liquidity risk management.

The final rules support our market integrity, consumer protection and competition objectives. By allowing AFMs flexibility to choose the most appropriate liquidity risk management model based on funds’ investors, strategies and asset classes, we also seek to support continued growth and innovation in the UK asset management sector.