The new UK AIFM regime starts to take shape

In an important day for alternative investment fund managers (AIFM) in the UK, HM Treasury (HMT) and the Financial Conduct Authority (FCA) both published on 14 July 2026 significant consultations. These set out proposals for the future AIFM regulatory regime in the UK. Once implemented, these new rules will represent the most significant regulatory change for UK alternative fund managers since AIFMD came into force in 2013.

Executive Summary:

New consultations published in July 2026 propose a significant update to the UK regulatory architecture for AIFMs. We expect the new rules to be in force in 2028.

For UK AIFMs, the key headline is that firms will be categorised into one of three new size-based categories, depending on NAV.

• The threshold from small-to-medium is at £750m, and the threshold from medium-to-large is above £5 billion.
• The FCA is proposing to update and amend many of the key rules applicable to UK AIFMs, including valuation, leverage, risk management, liquidity management, delegation and investor disclosure.
• The application of many of these rules will differ significantly, depending on the category of firm.

Alongside this, in a separate consultation the FCA is also proposing to streamline existing fund reporting requirements. Although these proposals go beyond AIFMs, the key impact for AIFMs will be scrapping the existing AIF001 and AIF002 regimes. These will be replaced with the new “FRAME” regime, which will have two tiers of reporting, “essential” and “enhanced” (with a per fund threshold of above £500m NAV to trigger enhanced reporting for that fund).

The FCA is also proposing a streamlining and simplification of the remuneration rules for UK asset managers.

For non-UK AIFMs which market in the UK, the good news is that the private placement regime will remain largely intact. There will be some amended disclosure and reporting requirements, but the core concept of private placement marketing via FCA notification will remain.

Finally, we emphasise that this will not apply to EU AIFMs in the EU, and also that this is not the UK implementation of EU AIFMD2. Once the new UK rules apply in 2028, there will be considerable divergence between the UK and EU versions of AIFMD.

Overview

The two key publications are

• HMT’s draft AIFM Regulations 2026 (the HMT CP) with an accompanying Policy Note and
• the FCA’s CP 26/28, ‘The UK AIFM Regime’ (the FCA AIFM CP).

Alongside these, the FCA has published two further consultation papers

• CP26/26 on Fund Reporting for Asset Management Entities (FRAME), which proposes improved reporting requirements for fund managers and
• CP26/27 on Remuneration: Solo-regulated firms’ rules reform, where the FCA is seeking to create a single remuneration code for asset managers, which is simpler and more flexible that the current regime.

Given the length and importance of the various CPs’ contents (with over 700 pages of consultation, discussion and draft rules), this note is merely a high-level overview – more detailed notes will follow once we have had an opportunity to properly review and consider the key implications for our clients.

Timing and next steps

Firms wishing to respond to the consultations have several months to do so, with the deadlines for responses falling in a staggered basis throughout September to October 2026.

We expect finalised rules to be published in the first half of 2027, with the rules likely to come into effect in 2028.

What do the CPs contain?

1. The HMT CP

The HMT CP sets out a draft Statutory Instrument (SI), which is still in development. Although the policy approach is broadly settled, respondents are being asked to flag any significant technical errors or oversights that would prevent the desired outcomes from being achieved or lead to significant unintended consequences.

To create a UK regulatory framework separate from that inherited under EU law following Brexit, the SI would repeal and replace existing assimilated law that concern AIFMs in the UK, including the EU AIFMD Level 2 Delegated Regulation, and the UK AIFM Regulations.

The SI also governs how the UK interacts with financial services regimes in overseas jurisdictions - where relevant, the Government will be able to recognise the regulatory approach of an overseas jurisdiction for specific purposes.

The SI is intended to remove unnecessary and overly burdensome requirements and to allow the FCA to make rules necessary to deliver a proportionate regime which will address the commonly recognised issues with the existing frameworks.

In particular, the SI would (among other things)

• remove most of the firm-facing requirements so new tailored requirements can sit in FCA rules
• clarify the definition of an AIF
• reform the registration regime, requiring property CIS to become authorised (while keeping the regime for Registered Venture Capital Funds (RVECAs) and Social Enterprise Funds (SEFs) pending a wider reform of Venture Capital Regulation)
• exempt small internally managed investment companies meeting certain conditions
• remove from legislation the thresholds at which firms are subject to significantly more requirements. This way, the FCA will be able to create a more dynamic regime where requirements increase as firms grow, so only the largest firms would be subject to the full rules akin to the current full scope AIFM regime. (Please see below for a summary of the FCA’s proposals for size thresholds)
• maintain the NPPR for overseas AIFMs and AIFs but, at the same time, giving the FCA additional powers to reform reporting requirements for domestic and overseas funds operating in the UK
• simplify disclosures by private equity portfolio companies.

2. The FCA AIFM CP

This builds on DP 23/2 (for a summary of DP 23/2, see here) and the FCA’s Call for Input from April 2025 (for a summary of the CFI, see here).

In the FCA AIFM CP, the FCA proposed a new sourcebook, the Alternative Investment Funds sourcebook (ALTS) for managers of unauthorised funds. Chapters in ALTS (as in FUNDS) would be thematic but largely organised to make broad chronological sense - from classifying firms and funds, through organisational requirements to marketing the fund.

The end aim is for most of the UK’s AIFM regime to be in FCA rules rather than in legislation. This should mean that, where the FCA believes it needs to change or adapt the framework, doing so will be quicker and nimbler than at present.

In summary, the FCA Rules in ALTS would be tiered around three new firm categories, based on the size of the firm’s NAV:

• Small: firms with less than £750m NAV. (We note that this is a significant increase from the threshold of £100m which had been proposed in the prior FCA discussions.)
• Medium: firms with more than £750m NAV, but less than £5 billion
• Large: firms with more than £5bn NAV.

The FCA AIFM CP outlines the FCA’s proposals for revised rules on many of the core regulatory requirements for AIFMs, including valuation, leverage, risk management, liquidity risk management, delegation, annual reporting, and investor disclosures. For most of these sets of rules, the application of the rules is staggered according to the category of firm as small / medium / large AIFM.

Beyond the concrete proposals for new rules in these areas, the FCA AIFM CP also contains several discussion-based chapters, with indicative proposals on the direction of travel, and requests for industry feedback. This includes the future of the depositary regime, how the rules for prime brokers interact with the depositary rules, a potential removal of the AIFMD business restriction, and how the prudential rules apply to AIFMs.

3. CP26/26 - Fund Reporting for Asset Management Entities
In light of the FCA’s recognition that current reporting requirements across a range of fund types produce “inconsistent data that is difficult for us to use and interpret, cumbersome for firms to report, and is not always targeted to the risks we need to monitor”, CP 26/26 outlines proposals to make fund reporting more proportionate while increasing the quality and consistency of data reported.

CP 26/26 proposes a single regulatory reporting framework – the Fund Reporting for Asset Management Entities, or FRAME - calibrated to the type, size and activity of the fund.

This would consolidate forms and reduce the need for some notification requirements based on three principles

• simplicity – so the FCA would collect the data it needs in its simplest form
• proportionality - so reporting requirements are matched to risks and
• international alignment – thereby reducing the variability of reporting across different regulators.

All in-scope funds would be subject to a set of “essential” reporting requirements. In addition. under these proposals, given their greater impact on market integrity, firms managing larger funds would report more data than firms managing smaller funds, known as “enhanced” reporting. In particular, there is a proposed threshold of fund NAV of £500m (note this is fund-by-fund, and not aggregated at manager-level) to require a firm to provide enhanced reporting for a fund.

The reporting period and reporting deadline will vary by fund type and in some cases by investment strategy. For example, a hedge fund would generally be required to report quarterly and within 45 days. (This would be a change from the current deadline of 30 days).

As part of the shift to FRAME reporting, the FCA also proposes to discontinue the current AIF001 and AIF002 reports.

The FCA estimates that its proposals would reduce the reporting burden for fund managers by 75%, while allowing it to be more targeted and better informed.

It’s also worth emphasising that the proposals for FRAME extend beyond AIFMs to include other types of fund managers, including UK UCITS managers, and funds marketed in the UK under national private placement rules or the OFR.

4. CP 26/27 - Remuneration: Solo-regulated firms’ rules reform

The remuneration framework that currently applies to certain solo-regulated firms – in SYSC 19B for AIFMs, SYSC 19E for UCITS ManCos and SYSC 19G for MIFIDPRU investment firms – has its basis in EU reforms post the 2008 global financial crisis.

A widely held view is that the rules can be hard to apply and may impose unnecessary burden, particularly for a firm that does not pose systemic risk.

Additionally, where firms have to deal with multiple regimes, they have sometimes duplicated requirements or have to apply the most stringent regime even where this is not the most appropriate one.

As a result, in CP 26/27, the FCA is proposing to

• replace SYSC 19B, SYSC 19E and SYSC 19G with SYSC 19AA, a single, consolidated new code for in-scope solo-regulated firms
• move towards a more outcomes-focused approach based on firm governance and accountability
• ensure that the remuneration regime applies only to firms that pose greater potential risks to consumers and markets
• introduce greater flexibility in deferral, malus and clawback moving responsibility more heavily to firms’ governance structures and the management body’s judgement
• simplify and update definitions and terminology
• set out transitional and sequencing arrangements (including how the new code would apply alongside forthcoming changes to the AIFM framework) so there is clarity around when requirements would take effect
• revoke non-Handbook guidance which is no longer relevant.

The FCA is proposing that the new remuneration rules and guidance would generally come into force the day after the PS is published – current expectations are that this will be in Q1 2027.

The new code would apply from that date to remuneration relating to performance periods beginning on or after the commencement date.

However, for AIFMs, it will be necessary to align the new code with the wider AIFM reforms, as this includes changes to definitions and to the thresholds which are used to categorise AIFMs.

As a result, the new remuneration code would apply into two stages

• first to full scope UK AIFMs from the commencement date above
• subsequently to medium and large UK AIFMs once the AIFM reforms take effect.