Small Registered AIFMs: The Reform is Here
The FCA has now published its long-awaited proposals for the new regulatory framework for managers in the UK. CP26/28: The UK AIFM Regime follows the FCA’s Call for Input and HM Treasury’s consultation, and provides much more detail on what the new regime will look like.
While much of the attention has been focused on the impact on existing FCA-authorised managers, the changes will have a particularly significant impact on a smaller group of managers who have, until now, operated under a far lighter-touch regulatory regime.
The current regime
The Small Registered AIFM regime allows certain managers to register with the FCA rather than become authorised, provided they remain below the relevant threshold.
This option is currently available to certain:
Property fund managers;
Internally managed, listed closed-ended investment companies; and
Managers of Social Entrepreneurship Funds (SEFs) and Registered Venture Capital Funds (RVECA)
The regime has historically meant that these firms are subject to significantly fewer regulatory requirements than authorised AIFMs. Property fund managers in particular currently operate in a very light regulatory environment.
The FCA and UK Government have identified several issues with the current regime, including the potential for a “halo effect”, where investors assume that registered firms are subject to FCA oversight because they appear on the FCA Register, as well as the cliff-edge created by the current thresholds.
What is changing?
Under the proposed new framework, the Small Registered AIFM regime will be removed.
Unless they benefit from a carve-out or exemption, firms currently operating as Small Registered AIFMs will need to seek FCA authorisation. There will be no grandfathering regime for registered AIFMs that need to become authorised.
Once authorised, these firms will fall within a new three-tier AIFM regime:
Small AIFMs: below £750 million aggregate NAV
Medium AIFMs: £750 million to £5 billion
Large AIFMs: above £5 billion
The £750 million threshold is a significant change from the current regime and is also considerably higher than the £100 million threshold originally considered by the FCA. The FCA is proposing to determine an AIFM’s size by reference to the aggregate NAV of the AIFs it manages.
For Small AIFMs, the FCA is proposing a set of core baseline standards, with additional requirements applying to medium and large AIFMs. The proposed framework covers areas including governance, valuation, risk management, liquidity, delegation, investor disclosures and reporting, while also removing or simplifying some of the more prescriptive requirements of the existing regime.
Reporting will also change, with the existing AIFMD reporting framework being replaced by the FCA’s proposed new FRAME regime.
What does this mean for Small Registered AIFMs?
For firms currently benefiting from the Small Registered AIFM regime, the transition to authorised status will be a significant undertaking.
The FCA has now provided enough detail for firms to start assessing the potential impact on their business and identifying areas where additional systems, controls, resources or expertise may be required.
Firms should start considering:
whether they will fall within the proposed Small AIFM category;
what changes may be required to their governance, systems and controls;
whether they have sufficient resources to meet the requirements of an authorised AIFM; and
what will be required to prepare for and successfully navigate the FCA authorisation process.
The consultation is open for responses until 14 October 2026, with final rules expected in 2027 and implementation of the new regime currently envisaged for 2028.
Transitioning from a registered to an authorised firm is a significant task. Firms should therefore engage with the proposals now, rather than waiting for the final rules, to understand what the changes could mean for their business and begin preparing for the transition.
How can ComplyCraft help?
We work with all types of managers and have in-depth expertise across alternatives, private equity, venture capital firms (including EIS managers), and property and infrastructure fund managers. Our team are highly experienced with smaller managers and the need to address regulatory requirements in a way that is proportionate and tailored to each business. We have successfully completed hundreds of applications, both as consultants and while working at the FCA, giving us a unique understanding of what the regulator expects in practice.
Our support can be tailored to your needs and may include:
Perimeter analysis and impact assessment to determine whether the proposed changes apply to your firm, how they may affect your business model, and the steps required to prepare.
Authorisation support, ranging from end-to-end project management and drafting of the FCA application to targeted review, challenge and recommendations for firms preparing materials internally.
Policy, systems and controls framework, including proportionate templates and practical guidance to help firms build the governance, compliance and operational arrangements expected of an authorised AIFM.
If you are a Small Registered AIFM and would like to discuss what the FCA’s proposals mean for your business, please get in touch.