The Financial Conduct Authority (FCA) is proposing reforms to its regime for alternative asset managers, making it easier for firms to enter the market, grow, and innovate.
According to the FCA, the new system will help firms operate globally while encouraging good risk management and will also maintain market integrity and protect consumers.
The government is consulting on removing AIFMD’s firm-facing requirements, with the FCA replacing them where needed. The FCA is also considering changes to its current AIFMD rules.
Additionally, the FCA, along with the Treasury, is looking into creating separate rules for investment trusts and venture capital firms. The FCA is seeking feedback on the proposals by 9 June 2025, with plans to consult on detailed rules in 2026, depending on feedback and government decisions.
Asset managers are vital to the UK economy, managing around £12.3 trillion in mainstream assets and £2 trillion in alternative assets. The Alternative Investment Fund Managers Directive (AIFMD) is one of the EU laws that shapes much of the UK’s asset management regulations.
Simon Walls, Interim Executive Director of Markets, said, “We want rules, better tailored to UK investment managers. These could allow them to operate more efficiently, further supporting competition, competitiveness and economic growth.
“It’s part of our wider work to streamline the regulatory regime for asset managers, to support the continued competitiveness of our world-leading financial services as outlined in our new strategy.”
Investment Association chief executive Chris Cummings says: “The UK is a world-leading centre for investment management, and we welcome the opportunity to work with policymakers and regulators to streamline the regulatory regime for investment managers to create a more proportionate and competitive regulatory framework. The AIFMD is integral to a range of funds used by both institutional and retail investors, with alternative investment funds playing an important role in the growth of private markets.
“The proposals will allow the UK investment management industry to better serve its customers in the UK and around the world, to deploy capital effectively to support growth and to make a broader contribution to the UK economy. We look forward to responding to today’s Call for Input from the FCA and to the Consultation from HMT.”
Farrer & Co partner Grania Baird says: “The FCA and Treasury announcements on the proposed reform of the AIFM regime are substantial. Firms will need to work through the two papers and respond by 9 June 2025.
“The increase in thresholds to ensure that only the largest firms are subject to the greatest regulation makes sense and there should be some benefits for medium sized AIFMs in the longer term, however there will be costs in the short to medium term in adapting to the new regime. The proposal to remove the small registered AIFM regime which the Treasury has said could create a “halo effect” is a blow for smaller boutique firms and funds who have benefited from this light touch regime.”
