In an era defined by rapid policy shifts and technological breakthroughs, investors must navigate an intricate web of rules that reshape markets every day. From settlement cycles to AI oversight, 2024–2026 will be a period of drinking from a fire hose of regulatory change. This article illuminates the key developments and offers practical strategies for portfolio resilience.

Understanding these dynamics is no longer optional. Regulatory trajectories now directly influence asset class attractiveness, liquidity horizons, and operational feasibility. By staying ahead of the curve, investors can turn compliance challenges into strategic advantages.

Macro context: Why regulation now matters

The sheer volume and velocity of new rules—driven by geopolitics, technology, and market structure shifts—mean that asset managers and owners face unprecedented complexity. Some jurisdictions pursue deregulatory paths, while others intensify scrutiny, resulting in a global patchwork that demands agile responses.

Key cross-cutting forces shaping the landscape include:

• Political shifts toward lighter-touch, cost-benefit-tested rulemaking approach in certain regions.
• Judicial constraints that can slow or reshape rulemaking through court review.
• Rapid technology adoption—AI, trading algorithms, digital assets—at the center of regulator focus.
• Deepening emphasis on sustainability and climate risk, especially in the EU.

Investors can no longer treat regulation as background noise: it is now a core driver of risk, return, and product design.

Market structure & liquidity: T+1 settlement and trading rules

In May 2024, North American markets compressed the securities settlement cycle from T+2 to T+1. This shift demands faster funding and collateral requirements, shrinking the time window for FX, securities lending, and error correction.

Looking ahead, the UK and EU plan a joint switch to T+1 on 11 October 2027. Industry estimates suggest even higher transition costs than those in the US, with buy-side firms spending north of US$220,000 each on system upgrades and testing.

The T+1 transition underscores a broader trend: operational agility now equals competitive advantage. Firms that absorb these costs can favor high-liquidity, plain-vanilla products, while smaller players may face tough trade-offs.

• Enhanced need for cross-border operational harmonization.
• Potential tilt toward larger managers with deep resources.
• Greater emphasis on liquid, operationally simple instruments.

Research unbundling and equity coverage

Post-Brexit, the UK is revisiting MiFID II rules on research payments. A 2024 review recommended optionality to shift to client-funded research, albeit with strict FCA guardrails on policies and budgets.

While there has been no mass return to client-funded models, some firms are exploring this path. If adopted broadly, sell-side research capacity may rise significantly, enhancing coverage in small- and mid-cap equities. This could influence portfolio allocations by improving liquidity in previously under-researched segments.

Crypto and digital assets: From gray zone to structured oversight

The SEC’s enforcement focus on crypto is intensifying. In 2025, expect sweep examinations targeting crypto-related risks across multiple firms, especially where retail and retirement assets are involved.

Under new leadership, the SEC may relax enforcement around private investments, but RIAs must still ensure best-interest recommendations. As regulatory clarity improves, investors may shift flows toward regulated, exchange-traded crypto products with stricter disclosure, suitability, and custody standards.

AI, algorithms, and automated advice/trading

Regulators in the US and EU are zeroing in on AI across front and back offices. The EU AI Act, effective February 2025, imposes stringent governance, transparency, and notification requirements for high-risk systems.

US regulators emphasize:

• Oversight to prevent discriminatory outcomes under anti-discrimination laws.
• Establishing robust testing and human-in-the-loop oversight for all automated tools.
• Appointment of dedicated AI compliance officers.

The resulting significant operational and compliance burden may raise barriers to entry for smaller, AI-driven strategies, reinforcing the edge of larger managers with established governance frameworks.

ESG and sustainable finance: Redefining sustainable products and data

On 20 November 2025, the European Commission proposed amendments to the Sustainable Finance Disclosure Regulation (SFDR) aimed at simplifying the framework and making it easier for investors to channel capital into genuinely sustainable assets.

The ongoing EU regulatory radar process highlights potential redefinition of product labels may cause reclassification of ESG funds, affecting flows. Investors will need to realign portfolios to evolving definitions, prioritizing assets with robust, verifiable impact data over those with superficial ESG claims.

Practical strategies for investors

Navigating this regulatory maze requires a proactive, structured approach. Consider the following steps to turn compliance into competitive advantage:

• Conduct quarterly regulatory horizon scans to identify emerging rules and timelines.
• Invest in cross-functional teams combining legal, compliance, and operations expertise.
• Stress-test portfolio liquidity and collateral processes against T+1 scenarios.
• Adopt dynamic AI governance frameworks that evolve with regulatory guidance.
• Review ESG fund classifications annually to ensure alignment with the latest SFDR updates.

By embedding regulatory intelligence into decision-making, investors can anticipate headwinds, capture new opportunities, and safeguard performance. Ultimately, the most resilient portfolios will be those that transform regulatory complexity into strategic insight.