Regulatory policy has never been in complete alignment, despite the longstanding Transatlantic alliance. A series of policy decisions this year, especially from the new American administration, means the gulf between the philosophies and practice of regulation is growing wider. This impacts how funds are structured, where they are domiciled, and ultimately which investors they can reach.
The following analysis looks first at Washington’s deregulatory turn, then at Brussels’ push for deeper rulemaking, before considering Britain’s attempt to position itself between the two.
Washington pulls back
The defining theme in Washington is deregulation. A flurry of executive orders and agency reversals signal a sweeping rollback of rules, especially in financial oversight. In January, the Trump administration mandated that for every regulation added, at least ten must be removed – “to alleviate unnecessary regulatory burdens”.
The SEC has responded. By June, 14 proposed market rules – including mandates on climate-related disclosures, AI use in financial advice, and crypto exchange regulation – were withdrawn by new chair Paul Atkins. His message: “We are getting back to our roots of promoting, rather than stifling, innovation.”
The Commission eased enforcement under its liquidity-rules framework and delayed compliance deadlines on the Names Rule, removing immediate pressure to align titles and holdings. Rules around retail access to private funds have also loosened, and tailored guidance for cryptocurrency ETFs means digital assets will move further into the mainstream.
Brussels doubles down
“Europe’s financial markets are fragmented to the point of acting like a 110% tariff,” warned commissioner Maria Luís Albuquerque earlier this year. It was an acknowledgement of how far the bloc still is from seamless capital flows. And yet Brussels’ instinct is still to build on top of existing regulation.
The Listing Act, due in 2026, rewrites prospectus and market-abuse rules with the aim of lowering barriers to listing, but adds complexity in certain areas. AIFMD II follows a similar pattern: tighter delegation rules, stricter liquidity requirements, more granular reporting and a higher bar for cross-border management. MiFID, and PRIIPs and SFDR changes are in the works – ever more granular disclosures, ever more detailed governance. Investor protection is the headline principle, but the execution is piecemeal and often at odds with an overarching objective to streamline requirements.
National supervisors still customise EU rules, adding their own conditions and creating a double layer of obligations. That means fund managers face Brussels on one side and 27 capitals on the other, each tugging in slightly different directions. EU policymakers emphasise stability and harmonisation – but firms must navigate a patchwork of overlapping demands.
Britain hesitates
Britain is in a peculiar position. Six years after Brexit, Canary Wharf is still crowded with banks and brokers. London still clears the bulk of the world’s FX trades. The outflow to Frankfurt and Amsterdam was real, but partial – more migration of desks than dismantling of an ecosystem.
Yet continuity hides change. The Financial Services and Markets Act 2023 gives the FCA and PRA sweeping powers to rewrite inherited EU law. The new Consumer Duty imposes obligations that go beyond MiFID’s investor-protection standards. Fund tokenisation pilots in the FCA’s Digital Securities Sandbox show a willingness to experiment that Brussels has not matched.
The UK has not entirely set its own path. While SFDR has been – and PRIIPs will be – replaced, many disclosure and reporting obligations still closely resemble European formats. For asset managers this creates a grey zone: close enough to EU standards to ensure continuity, but divergent enough to force duplication. A UK manager selling into the EU must still prepare EU-required documentation, while keeping pace with the evolution of UK-specific requirements at home.
Britain has options. It can tilt toward the US model or hold alignment with the EU to preserve distribution rights. The danger is indecision. Drifting between two poles risks satisfying neither. But if the UK can position itself as a credible bridge – regulatory flexibility married with market depth – it may yet turn divergence into competitive advantage.
Divergence as opportunity
For international managers caught between Washington’s pullback and Brussels’ expansion, the challenge is surviving divergence. Multiple rulebooks now govern everything from fund naming to distribution. The risk of time-consuming, costly duplicative work is very real.
Compliance architecture must be seen as a competitive asset. That means building systems and choosing partners that can flex between jurisdictions, assigning clear ownership for cross-border oversight, and communicating distinctions to investors with precision. Firms that engineer agility – modular reporting, jurisdiction-specific approaches – will be better placed to pivot as rules change.
While realignment talks may surface in London and Brussels from time to time, managers cannot afford to wait. The task is to convert regulatory friction into resilience and, where possible, competitive advantage.
