The FCA has published CP26/28, unveiling plans for a fundamentally redesigned UK regime for alternative investment fund managers (AIFMs). Alongside HM Treasury’s draft legislation, the consultation proposes replacing much of the UK’s existing EU Alternative Investment Fund Managers Directive (AIFMD)-derived framework with a new FCA Alternative Investment Funds sourcebook (ALTS).
If implemented, these changes would represent the most significant overhaul of UK fund manager regulation since AIFMD was introduced in 2013 and mark a material divergence between the UK and EU AIFM regimes. While the FCA’s proposals aim to simplify and modernise the framework, they could also reshape how many firms are authorised, classified, and supervised.
Many firms may benefit from a simpler and more proportionate framework. However, currently registered AIFMs and some small authorised AIFMs may face significantly increased regulatory requirements and should assess the potential impact well before the proposed implementation date.
The new regime is expected to take effect in 2028, subject to consultation. However, the FCA is seeking feedback on where certain requirements can be removed earlier, where doing so would immediately benefit firms.
This consultation will be particularly relevant for compliance and legal teams and CCOs, COOs, CEOs, and other senior leaders at UK alternative investment fund managers and buy-side firms.
Key Dates for the FCA AIFM Consultation
- 18 September 2026: Responses due on depositary, prime broker, and business restriction proposals.
- 14 October 2026: Responses due to the main consultation and draft rules.
- 2027: The FCA publishes its final policy statement and final Handbook rules, alongside the Treasury’s finalised statutory instrument.
- 2028: The new AIFM regime and asset management reporting regime take effect.
The FCA Proposes a New Three-Tier AIFM Regime
The FCA proposes abolishing the registered AIFM regime, except for Registered Venture Capital Funds (RVECAs) and Social Enterprise Funds (SEFs). As a result, many currently registered firms would need to become fully authorised. For firms that have historically operated under a lighter-touch regime, this could require significant changes to governance, compliance arrangements, and regulatory oversight.
The FCA also proposes replacing the current sub-threshold/full-scope distinction based on assets under management (AuM) and leverage with a three-tier structure based on net asset value (NAV):
- Small AIFM: Less than £750 million in NAV
- Medium AIFM: £750 million to £5 billion in NAV
- Large AIFM: Above £5 billion in NAV
As leverage can significantly increase AuM relative to NAV, many firms may fall into a lower category under the new framework. Firms may also elect to be classified in a higher category voluntarily.
This approach should reduce the administrative burden on firms. However, firms should not assume that a lower classification will necessarily result in fewer compliance obligations, as the applicable requirements will depend on both their categorisation and the nature of their activities.
The FCA Proposes Simpler Rules for UK AIFMs
The FCA proposes to clarify, simplify, or remove several key AIFMD requirements, including:
- Alternative Investment Fund (AIF) definition: Clarification of the definition may bring some Collective Investment Scheme (CIS) managers into scope, requiring them to be authorised as AIFMs.
- Reporting: Annex IV reporting would be replaced by Fund Reporting for Asset Management Entities (FRAME); the FCA expects this to reduce reporting by around 75%. This new reporting framework is the subject of a separate consultation paper – CP26/26.
- Leverage: Existing leverage calculations and the “substantially leveraged” category would be removed. Hedging derivatives would not count as leverage.
- Investor disclosures: Requirements would become more principles-based. Small AIFMs would provide a short annual summary rather than a full annual report.
- Delegation: Prior FCA approval would no longer be required. Firms would notify the FCA after implementation of the delegation arrangement.
- Liquidity management: Requirements would be simplified for small AIFMs but broadly maintained for medium and large AIFMs.
- Depositaries: Requirements would remain for medium and large AIFMs, with potential flexibility around depositary arrangements and cash reconciliations.
- Valuation: Valuation rules would apply to all AIFMs, with external valuer provisions replaced by FCA conditions for appointing an independent valuer.
- Remuneration: In a major overhaul of the remuneration rules, the FCA proposes a single remuneration code for AIFMs, Undertakings for Collective Investment in Transferable Securities (UCITS) managers, and firms subject to the MiFID Investment Firms Prudential Regime (MIFIDPRU), with a move away from prescriptive rules to a more outcomes-focused approach. The remuneration rules are the subject of a separate consultation paper – CP26/27.
- Prudential: Fund managers are expected to move into the FCA’s Core Prudential (COREPRU) framework, subject to a future consultation.
For current small authorised AIFMs, the proposed baseline requirements would include stress testing, maintaining delegation documentation, annual investor summaries, and at least two experienced directors.
The UK National Private Placement Regime (“NPPR”) would remain largely unchanged.
Taken together, the proposals indicate a shift towards a more proportionate, UK-specific regime that places greater emphasis on outcomes rather than prescriptive requirements.
Firms should consider the proposals as more than a routine regulatory development. They represent an opportunity to review whether existing governance, reporting, and compliance arrangements remain fit for purpose.
How UK AIFMs Should Prepare for the New Regime
Firms should:
- Assess whether they will require authorisation under the new regime.
- Identify the firm’s likely NAV-based classification and evaluate the resulting impact on leverage, governance, valuation, and liquidity arrangements.
- Monitor future FCA consultations in this area, including prudential proposals, and highlight developments at board and senior management level.
- Consider responding to the consultation, directly or through industry bodies.
Preparing for the New UK AIFM Regime
The proposed reforms present an opportunity for firms to assess how the new UK AIFM regime could affect their regulatory obligations and compliance framework. Starting this work now can help avoid unnecessary implementation challenges later.
ACA assists UK fund managers with regulatory change programmes, authorisations, governance reviews, regulatory reporting, and compliance framework enhancements.
Find out how the proposed reforms could affect your firm and what steps you should take next.