The UK’s Financial Conduct Authority (FCA) has announced plans to significantly reform the regulatory framework for UK-based investment managers. The initiative, part of a broader drive to enhance the UK’s global competitiveness, aims to streamline regulatory obligations, reduce compliance burdens, and foster growth across the asset management sector.
In this blog, we explore what these proposed changes could mean for investment managers, the key highlights of the reforms, and why firms should be paying close attention.
What the FCA’s Proposed Reforms Mean for Investment Managers
The FCA’s early-stage proposals signal a major opportunity for investment firms to reassess their operational and compliance models. A shift towards more flexible and proportionate rules could enable firms, particularly those managing alternative investment funds, to implement leaner compliance strategies, embrace greater automation, and innovate their service delivery.
Aligned with the UK’s economic growth agenda, these reforms could help investment managers optimise resources while maintaining high regulatory standards.
Key Highlights of the FCA’s Proposed Changes
1. Introduction of a Three-Tiered AIFM Framework
The FCA plans to segment Alternative Investment Fund Managers (AIFMs) into three distinct categories based on their Net Asset Value (NAV), moving away from the current one-size-fits-all model:
- Large AIFMs (over £5 billion NAV):
Will continue under a full-scope regime, but with potential simplifications aimed at reducing unnecessary compliance burdens. - Mid-Sized AIFMs (£100 million–£5 billion NAV):
Will follow a tailored regulatory regime offering more flexibility. - Small AIFMs (under £100 million NAV):
Will only be subject to essential regulatory standards, making it easier for smaller firms and startups to operate without excessive overhead.
2. Greater Flexibility in Setting Regulatory Thresholds
The FCA proposes gaining enhanced powers to adjust regulatory thresholds dynamically, allowing rules to better match the size, risk, and complexity of individual firms. This flexibility is intended to prevent disproportionate compliance costs and ensure a more responsive regulatory framework.
3. Faster Time-to-Market for New Funds
To encourage innovation and competition, the FCA is considering removing the current 20-day advance notice period for launching new funds. The reforms would also restate and clarify the UK’s approach to overseas AIFM marketing.
4. Review of Depositary Oversight and Valuation Liabilities
Although no major overhaul is planned for depositary oversight, the FCA recognises the need to reassess rules around external valuers’ liability. The goal is to encourage broader market participation without compromising on standards.
5. Implementation Timeline
- Consultation Open: Until 9 June 2025
- Formal Consultation: Expected in the first half of 2026
- Transition Period: Adequate lead time will be given to firms to prepare and adjust.
Global Implications: A Broader Perspective
Although the reforms are UK-centric, they could have global ripple effects. Firms managing UK-facing funds or offering cross-border services may need to reassess their structuring, delegation models, and investor disclosure strategies.
As regulatory divergence between the UK and EU continues, operational fragmentation could increase, requiring fund managers, regulatory technology providers, administrators, and legal advisers to adjust systems and processes accordingly.
These proposals may also influence regulatory debates and best practices across international financial centers.
Next Steps for Firms
At Reg-X, we recommend that AIFMs, compliance teams, legal departments, and service providers actively monitor the FCA consultation process and participate where possible.
These reforms represent more than just a regulatory adjustment, they could redefine how investment management firms operate within and beyond the UK.
By embracing technology-driven solutions like RegAssure, Periodic Reporting, and RegData, firms can prepare for a future of more agile, scalable compliance.
Contact us today to see how we help your business!
Stay Informed
To learn more about the consultation and the FCA’s proposals, visit the official resources:
