The FCA is consulting on proposals to reform the regulatory framework for alternative investment fund managers (AIFMs). Compliance specialist Keith Maner looks at the changes that could have far-reaching implications for authorised, registered and prospective fund managers ahead of implementation in 2028.
The proposals aim to remove unnecessary complexity and administrative burdens, support AIFM firms to grow and compete internationally, and maintain high standards where they matter most.
The consultation is relevant to:
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UK authorised AIFMs and UK registered AIFMs
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Firms marketing alternative investment funds in the UK
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Residual collective investment scheme (CIS) operators
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Depositaries, prime brokers and delegates of AIFMs
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Firms considering entering the UK alternative investment market
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UCITS management companies (in relation to the discussion chapter on prudential reforms for asset managers)
The FCA is inviting responses on the discussion chapters by 18 September 2026, except for the discussion chapter on prudential reforms, which closes on 14 October 2026.
It will review all responses and publish a policy statement setting out the final rules. It also intends to publish a second consultation paper with draft rules on remaining areas of the AIFM regime, including areas covered by discussion chapters in CP26/28.
The Treasury is running a parallel consultation on changes to the underlying legislation. The implementation date currently envisaged for the new regime is 2028. It also proposes removing the AIFM registration regime, except for Registered Venture Capital Funds (RVECAs) and Social Enterprise Funds (SEFs).
What does this mean for firms?
Requirements have become dated; for instance, firm size thresholds have not reflected inflation or growth in the market. 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. The FCA’s aim is to make the rules more proportionate to firms’ size and activities, and to better match the rules to firms’ risks.
The proposals update the size thresholds and introduce a new three-tier structure of small, medium and large firms, with a graduated application of the rules replacing the current approach. Greater flexibility should help firms compete, innovate, and do cross-border business.
The threshold for smaller AIFMs to transition to medium AIFMs will be set at £750m NAV under management and the FCA is consulting on an upper threshold of £5bn NAV, above which firms will be considered large AIFMs. Leveraged assets under management will no longer be taken into account in the calculation.
When a firm crosses a threshold, whether to a larger or smaller size category, it will not have to apply for any change in its authorisation status, permissions or requirements. Instead, the FCA expects firms to notify it that they have crossed the threshold.
A more proportionate risk management framework
The FCA believes that the AIFM risk management regime should be more proportionate and better tailored to firms’ activities. Based on the existing distinction for categories of AIFM, it is proposing a framework that differentiates between managers of closed-ended, unleveraged AIFs, closed-ended leveraged AIFs and open-ended AIFs.
Small firms do not need to appoint a depositary for each AIF they manage (although they must comply with CASS 6 custody rules), but medium-sized firms must do so.
A new sourcebook, the Alternative Investment Funds sourcebook (ALTS), is proposed, to bring most AIFM rules together in one place. ALTS will replace the FUND sourcebook and is intended to make the regime easier for firms to navigate and quicker to update in future.
See also our recent blog posts on Fund Reporting for Asset Management Entities (FRAME) and on Proposed Reforms to the UK AIFM Regime.
How Thistle Initiatives can help
We can help you with:
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Understanding the three-tier structure and the graduated application of the rules
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Interpreting the ALTS sourcebook
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Assessing the potential impact of the reforms on registered fund structures
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Understanding depositary requirements under the proposed regime
If you would like to discuss how the proposed reforms could affect your business, please get in touch with Keith at info@thistleinitiatives.co.uk or call 0207 436 0630 to speak with our team.
Meet the Expert
Keith Maner, Compliance and Technical Manager and CASS Lead 
Keith Maner is a seasoned compliance professional and the CASS lead at Thistle Initiatives. With over 20 years of experience in financial services, Keith specialises in helping firms navigate the complex requirements of the FCA’s Client Assets Sourcebook (CASS).
He also supports a wide range of clients, from newly authorised firms to established institutions, by providing a wide range of regulatory advice.