UK seeks feedback on revisions to regulation of alternative investment fund managers

The HM Treasury (HMT) has launched a consultation on proposals to revise the legislative regime applicable to Alternative Investment Fund Managers (AIFMs) and the depositories they use. The government intends to use the powers and framework provided for under the Financial Services and Markets Act 2023 to repeal the existing AIFM regulations, maintaining or replacing those with key legislative provisions and moving much of the detail to the FCA's Handbook. The FCA has also issued a call for input, together with a press release and has updated the FCA's webpage, setting out its proposed approach to regulating AIFMs within HMT's proposed framework.

The proposals are, among other things, to:

• Remove the legislative threshold of €100m of assets under management for determining whether an AIFM is a full-scope AIFM, a small authorised AIFM or a small registered AIFM. Removing this threshold will allow the FCA to determine a regulatory framework based on the activities, investors and risks of AIFMs. The FCA is proposing three tiers of firms: (i) large firms with an £5bn net asset value; (ii) medium sized firms with more than £100m of net asset value; and (iii) small firms below the medium threshold.
• Require managers of Unauthorised Property Collective Investment Schemes and internally managed investment companies to be FCA authorised. Removing the above legislative threshold will bring small registered AIFMs within the regulatory perimeter. HMT will be separately considering the approach for managers of Social Entrepreneurship Funds and Registered Venture Capital Funds (RVECA funds). The FCA states that it will adjust the regime for RVECA funds once HMT has made its policy decision. The FCA believes that a bespoke regulatory regime would be beneficial for economic growth.
• Keep Listed Closed-Ended Investment Companies within scope of the AIFM regulations, including internally managed Listed Closed-Ended Investment Companies (LCICs). The FCA is considering whether a different approach to regulating managers of LCICs is appropriate for certain areas, such as transparency rules, leverage and delegation.
• Broadly restate the National Private Placement Regime in legislation.
• Amend the marketing notification rules and rules requiring notification of the acquisition of non-listed companies and issuers.
• Remove the legal liability of external valuers of AIFs.
• Move some definitions, such as "managing an AIF" to the Regulated Activities Order.

The FCA is proposing a new rule structure for AIFMs based on the product lifecycle. The FCA states that it will consider the limits on the leverage following the Financial Stability Board's recommendations on non-bank financial intermediation, which are expected later this year. The FCA will also, in the future, review the remuneration rules, prudential requirements, rules for depositories, business restrictions and regulatory reporting.

Responses to both HMT and the FCA may be submitted until 9 June. Following consideration of the responses, HMT will publish a draft statutory instrument on the regulatory framework for AIFMs and the FCA plans to consult on detailed rules in the first half of 2026.

[View source.]