Compliance functions in corporate finance markets

On 8 October 2026, the FCA published the results of a survey assessing corporate finance firms’ compliance functions and their ability to effectively challenge the business. The FCA had previously announced in their March 2026 Regulatory Priorities Wholesale Markets report that they would assess corporate finance firms’ compliance functions.

The FCA surveyed 411 corporate finance firms in relation to their compliance resources and activities and received 382 responses. Although most firms reported carrying out key compliance activities, the findings also show where more needs to be done.

The FCA acknowledge that there is no single blueprint for what effective compliance looks like, finding that firms operated a range of different practices. However, they say the findings underline an overarching principle that compliance cannot be seen as simply a series of tasks, but a culture that senior managers must embed throughout the business.

Most firms in the survey were small: 64% had 9 or fewer employees and 89% had fewer than 50.

63% of firms had a compliance function that was not dedicated solely to compliance activities, and had other business responsibilities, noting that this can create conflicts of interest, for example when the compliance function also plays a role in revenue generation.

The FCA also say that compliance arrangements will differ according to the nature, scale and complexity of the business and should be proportionate to the risks involved. Nevertheless, those arrangements are only proportionate if they allow good outcomes, namely high standards of conduct and effective conflicts management, to be delivered. This is particularly important in small firms, where decision-making may be concentrated in a small number of people, where the compliance function must have enough presence, authority and access to exert influence and provide meaningful challenge. This compliance second line of defence must also scale up as a firm grows, or as its activities take on greater impact.

The survey found that 90% of the respondents used some form of third-party compliance support. The FCA comment that while external expertise can be valuable, especially for smaller firms, responsibility for regulatory compliance remains with the relevant senior management function holder at the firm. Firms must stay actively involved, understand the advice they receive and maintain effective oversight of any third-party support.

More worryingly, although the survey found that most firms reported carrying out key activities the FCA expects and 47% carried out all the activities covered by the survey, there were wider gaps in some firms’ practices.

A table in the survey showed gaps including arrangements for staff to safely raise concerns, keeping breach registers, monitoring complaints, reporting to management and involving compliance in management meetings. A significant number of firms reported not including regulatory compliance in staff performance assessments.

Of the activities included in the FCA’s survey, the FCA found the number of firms that reported not conducting the activity included:-

• 32 firms without a compliance manual;

• In 38 firms, compliance did not regularly review policies and procedures;

• Staff of 49 firms did not receive compliance-related training;

• 67 firms had no compliance monitoring programme;

• 82 firms had no breach register;

• At 82 firms, compliance did not attend management body meetings;

• 90 firms did not have arrangements for the disclosure of concerns by whistleblowers.

The FCA say that firms should therefore consider:-

• whether compliance has enough presence, authority and access to influence and challenge the business;

• whether compliance is involved early enough in important business decisions;

• whether senior managers receive timely and clear information about compliance risks and breaches; and

• whether staff can raise concerns safely and those concerns are properly escalated and investigated.

In terms of next steps, the FCA will engage further with selected firms to understand the adequacy and effectiveness of their compliance resources and explore gaps in practice.

They warn that in the meantime, firms should use the FCA’s findings to reflect on their arrangements and identify where improvement is needed.
   

Our reflections

While the survey refers to some positive findings, we found that the results were quite alarming in a number of respects. The absence of some of the basic compliance systems and controls in some firms does not appear to be consistent with the expectations of the FCA themselves and clients.