Insights · FCA cyber security

FCA cyber security requirements in 2026: what firms must actually do

What the FCA expects on cyber security, which rules it comes from, how the new incident reporting rules in PS26/2 change things from March 2027, and the controls and evidence a small or mid-sized firm should have in place.
The short answer

The FCA has no separate cyber rulebook. Its expectations come from the duty to have adequate systems and controls (Principle 3 and SYSC), to be open with the regulator (Principle 11), to manage outsourcing (SYSC 8) and, for larger firms, operational resilience (SYSC 15A). In practice that means proportionate security controls, oversight of your IT providers, a tested incident plan and prompt reporting. From 18 March 2027, PS26/2 sets out a standard way to report operational incidents, including cyber attacks, normally within 24 hours of deciding an incident meets the threshold.

Key points
  • Cyber expectations sit in Principles 3 and 11, SYSC, SUP 15 and, for in-scope firms, SYSC 15A. Dual-regulated firms also follow the PRA.
  • The FCA does not mandate Cyber Essentials or ISO 27001, but it expects controls proportionate to your size and risk, and evidence that they work.
  • PS26/2 applies to every firm with a Part 4A permission from 18 March 2027: report qualifying incidents within 24 hours of deciding they meet the threshold. Payment service providers have 4 hours from detection.
  • Larger firms must also notify the FCA before committing to new or materially changed material third-party arrangements, and keep a register.
  • Using an IT provider never moves responsibility away from your firm.

Where the FCA’s cyber expectations come from

Search for an FCA cyber security rulebook and you will not find one. The FCA regulates cyber risk through rules that apply to all operational risk, so the obligations are spread across a few parts of the Handbook:

  • Principle 3, management and control. A firm must take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems. A firm that cannot keep client data and systems secure is unlikely to meet it.
  • SYSC, systems and controls. Firms need robust governance, effective processes to identify, manage and monitor risks, and sound security mechanisms for their IT systems. The detail varies by firm type, but the expectation is consistent: controls proportionate to the nature, scale and complexity of the business.
  • Principle 11 and SUP 15.3, telling the FCA. Firms must tell the FCA about anything it would reasonably expect notice of, including significant operational and cyber incidents.
  • SYSC 8, outsourcing. If you rely on a third party for critical or important functions, including IT and cyber security, you remain responsible and must supervise it.
  • SYSC 15A, operational resilience. Banks, building societies, insurers, larger investment firms and payment firms must identify important business services, set impact tolerances and test that they can stay within them.

On top of FCA rules, UK GDPR applies to the personal data you hold, and the Consumer Duty expects you to avoid foreseeable harm to retail customers, which includes harm from fraud and data loss that weak security makes possible.

What “adequate” cyber security looks like for a smaller firm

The FCA judges controls against your size and risk, so an adviser with ten staff is not expected to run a security operations centre. It is expected to have the basics done well and to be able to show it. These are the controls a supervisor, auditor or insurer will usually ask about first:

ControlWhat good looks likeEvidence worth keeping
IdentityMulti-factor authentication on email, Microsoft 365, platforms and remote access, with no forgotten exceptions.MFA coverage report, list of approved exceptions with an owner and review date.
DevicesCompany devices managed centrally, encrypted, patched within 14 days for critical fixes, with endpoint protection.Device compliance and patch reports.
EmailFiltering, DMARC, SPF and DKIM configured, and external email clearly marked.DMARC report, mail filtering settings.
AccessLeast privilege, separate admin accounts, leavers removed the same day, access reviewed at least every quarter.Access review records, joiner and leaver logs.
BackupBackups of Microsoft 365 and key systems kept separately from the live environment, with restores tested.Backup reports and restore test records.
PeopleRegular phishing awareness training and a clear rule for verifying payment and bank detail changes.Training completion and phishing simulation results.
ResponseA written incident plan that names who decides, who reports and who to call, exercised at least once a year.Plan, exercise notes, actions closed.

Cyber Essentials is a sensible way to prove the first five rows to an independent assessor. Our Cyber Essentials guide covers what changed in 2026.

PS26/2: incident reporting from 18 March 2027

The FCA published PS26/2, Operational incident and third party reporting, on 18 March 2026. The rules apply from 18 March 2027 and cover every firm with a Part 4A permission, payment service providers and some market infrastructure. A cyber attack is one of the most likely triggers.

  • What counts as an operational incident. A single event, or a series of linked events, that disrupts your operations and either disrupts services to clients or affects the availability, authenticity, integrity or confidentiality of their data.
  • When you must report. When you reasonably believe the incident could cause intolerable harm to consumers, threaten your safety and soundness or that of other market participants, or affect market integrity or confidence. Near misses and planned outages will not usually need a report, but Principle 11 still applies.
  • How fast. As soon as practicable and no later than 24 hours after you decide an incident meets a threshold. Payment service providers must report within 4 hours of first detecting an incident.
  • How much. Most firms submit a single standard report. Firms in the enhanced regime also send updates and a final report. The FCA’s guidance in FG26/3 explains which applies to you.

The 24-hour clock starts when you make the decision, not when the attack began, but the FCA will expect that decision to be made promptly. That makes two things essential before 2027: a named person who can make the call quickly, and an IT provider contractually obliged to tell you about incidents straight away.

Third-party reporting and your IT provider

PS26/2 also requires certain firms, including enhanced-scope SM&CR firms, banks, building societies, insurers and authorised payment and e-money institutions, to identify their material third-party arrangements, notify the FCA before becoming contractually or operationally committed to a new or materially changed one, and submit a register every year.

Even if those notification rules do not apply to you, SYSC 8 does in substance: you must do due diligence before appointing an IT or cyber security provider, agree contract terms covering security, access, audit, incident notification and exit, and keep supervising them. Our guide to IT vendor and outsourcing management sets out a proportionate approach.

A related change is on the way. The Cyber Security and Resilience Bill, which was before the House of Lords in autumn 2026, is expected to bring many managed service providers into the UK’s network and information systems regime, with their own duties to report significant incidents. That will raise the bar for providers, but it does not reduce your own obligations to the FCA.

Tools the FCA offers

The FCA points firms to a few tools on its cyber resilience page. CQUEST is a 50-question cyber resilience self-assessment developed with the PRA, and ORQUEST covers wider operational resilience; both are available through your supervisor. Larger, systemically important firms may be asked to take part in CBEST threat-led penetration testing, and the FCA publishes themes from those tests and from its Cyber Coordination Groups. Smaller firms can use these themes as a free checklist of what regulators are seeing.

Where to start

If you are not sure where your firm stands, a practical order of work is:

  1. List your systems, data and IT providers, and which ones your clients depend on.
  2. Close the basic gaps: MFA everywhere, managed and patched devices, email security and tested backups.
  3. Write a one-page incident plan that names your PS26/2 decision-maker and reporting route, and test it with a short tabletop exercise.
  4. Check your IT provider contract for incident notification, access and exit terms.
  5. Collect the evidence in one place, so you can answer a supervisor, auditor or insurer in minutes.

Our cyber incident playbook covers who to notify, and when, if the worst happens.

Sources and further reading

Written by
CEO, Cre8 IT
Rob Crossley is CEO of Cre8 IT, a managed IT and cyber security company that has supported businesses across the UK, the UAE and Saudi Arabia since 2012. Cre8 IT is certified to ISO 27001:2022 and ISO 9001 and is a certified Microsoft Partner.
FAQ

Frequently asked questions

Does the FCA require Cyber Essentials?

No. The FCA does not mandate a particular certification. It expects controls proportionate to your size and risk, and Cyber Essentials or Cyber Essentials Plus is a recognised, affordable way to show the basics are in place. See our Cyber Essentials guide.

Do small firms such as IFAs have to follow PS26/2?

Yes. From 18 March 2027 the operational incident reporting rules apply to every firm with a Part 4A permission, including small advice and broking firms. Most will submit a single standard report within 24 hours of deciding an incident meets the threshold.

Is a phishing email an incident we have to report to the FCA?

Usually not. Routine phishing that is blocked or reported by staff does not need a report. An attack that disrupts client services or compromises client data, such as a hijacked mailbox used to divert payments, may meet the threshold and should be assessed straight away.
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