FCA consults on new rules for AIFMs

The Financial Conduct Authority (FCA) has launched a consultation on new rules for alternative investment fund managers (AIFM), aiming to remove complexity and administrative burden, support firms’ growth, and maintain high standards.

The regulator stated that the current UK framework for AIFMs, which is derived from EU law, has become complex, with requirements spread across legislation, Treasury regulations, and FCA rules.

“Requirements have become dated – for instance, firm size thresholds have not reflected inflation or growth in the market,” the FCA said.

“Some rules do not sufficiently distinguish between AIFMs doing different business, such as funds frequently trading financial instruments on markets and funds holding illiquid investments over a longer term.

“Our aim is to make the rules more proportionate to firms’ size and activities, and to better match the rules to firms’ risks.”

The regulator has proposed updating the size thresholds and introducing a new three-tier structure, consisting of small, medium, and large.

It will adopt a graduated application of the rules, replacing the current approach, and said greater flexibility should help firms compete, innovate, and conduct cross-border business.

A new sourcebook, the Alternative Investment Funds sourcebook (ALTS), was also proposed, bringing most AIFM rules together in one place.

The FCA argued this would make the regime easier for firms to enter and navigate, and quicker for the regulator to update.

The consultation is open until 14 October 2026, with the FCA to review responses before publishing a policy statement setting out its final rules.

It also plans to publish a second consultation paper with draft rules on the remaining areas of the AIFM regime.

The Treasury is running a parallel consultation on changes to the underlying legislation.

The FCA said the current planned implementation date for the new regime was 2028.

“We have engaged extensively with industry on reform,” the regulator stated. “This consultation builds on our earlier discussion paper and call for input, as well as roundtables and bilateral meetings with firms and trade bodies. It sets out draft rules and asks for feedback on specific policy questions.

“We're also publishing, alongside this paper, a separate consultation on Fund Reporting for Asset Management Entities (FRAME), which proposes improved and simplified reporting requirements for fund managers, and a consultation on reforming the remuneration code for asset managers.

“This work supports our commitment to a regulatory framework that promotes growth and international competitiveness while protecting consumers and market integrity.”

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