The Financial Conduct Authority claims new rules will make it easier for UK asset managers to operate around the world.
It is one of almost 50 actions set out by the FCA to support economic growth.
The regulator is proposing changes to its regime for alternative asset managers, including having different rules for firms carrying out different activities to make the regulations fairer.
Simon Walls, interim executive director of markets, said: “We want rules, better tailored to UK investment managers. These could allow them to operate more efficiently, further supporting competition, competitiveness and economic growth.
“It’s part of our wider work to streamline the regulatory regime for asset managers, to support the continued competitiveness of our world-leading financial services as outlined in our new strategy.”
What is the FCA proposing?
Much of the UK’s asset management regulation is derived from EU legislation, including the alternative investment fund managers directive (AIFMD).
Currently when a firm has €500mn of assets under management it falls under the full scope of AIFMD. The FCA said this means it has to hold “substantially more regulatory capital” to meet regulations which poses a barrier to firms as they grow.
The proposals from the FCA, set out in its call for input paper, said the rules should be more proportionately applied to smaller firms so they do not reach a “cliff edge” when they hit this threshold.
The paper said: “Our goal is to make the regime easier to understand and navigate, making it simpler for new entrants to join the market and for existing firms to grow without undue regulatory burdens.”
It said it is considering using net asset value to decide what size a firm is rather than assets under management.
It is proposing an upper threshold of £5bn AUM to determine larger firms, which represents 64 firms in the current regime.
For small firms, it is proposing setting the lower threshold at £100mn. Firms in between these two figures would be subject to the mid-sized firms regime.
For the largest firms the rules would be broadly the same, though some “unnecessarily burdensome” rules will be removed.
The FCA said there will be more flexibility for mid-sized firms and expects a good number of firms would fall into this category and therefore not have to comply with the more stringent rules of larger firms.
The FCA said: “Existing full-scope firms that become reclassified as mid-sized under the new rules would be subject to a simpler, more flexible and less onerous regime. A significant number of firms should be reclassified as mid-sized as we increase the thresholds.
“Reducing prescriptive rules would give firms the option to comply in a way that works best for them. This could reduce costs for some firms, improve their efficiency and promote more competition in the market.
“These firms would also benefit from the removal of unnecessary rules across the board and applying certain rules only to those undertaking specific activities.”
And small firms would be subject to the core requirements of the regulations, “appropriate to their size and activity”.
The FCA said this would set a baseline standards for consumer protection but would see a “significant” reduction in prescriptive requirements.
The regulator is calling for responses to the plans by June 9 and a full consultation is expected in the first half of 2026.
tara.o’connor@ft.com
What’s your view?
Have your say in the comments section below or email us: ftadviser.newsdesk@ft.com
