City watchdog eyes rules overhaul for UK asset managers
The UK’s financial watchdog has proposed a host of reforms aimed at simplifying reporting for asset managers and end industry confusion over complicated regulations.
The Financial Conduct Authority (FCA) said the modernisation of the rules will tailor requirements for asset managers, cut costs for firms and provide better data for the sector, saving managers £128m a year.
It confirmed the majority of savings are expected to come from a recommended new framework dubbed Fund Reporting for Asset Management Entities (FRAME).
It aims to modernise the current Alternative Investment Fund Managers Directive (AIFMD) framework which has rules dating back to 2013. Industry critics have argued AIFMD rules are overly complex and outdated, deriving back to EU regulations rather than serve the UK market.
Under AIFMD, asset managers are required to complete numerous data fields covering portfolio concentration and risk profiles. FRAME simplifies this process by replacing the data field with consolidated datasets that monitor wider market risk.
Simon Walls, executive director of markets at the FCA, said: “By tailoring the regime for UK asset managers, we can collect better data while also saving the industry tens of millions of pounds a year.
“With a sharp focus on proportionality, we can particularly boost freedom for smaller firms.”
Proportionality
The new framework also defines a firm’s size based solely on net asset value (NAV).
Firms with NAV under £750m are given lighter rules and minimal paperwork in contrast to firms with over £5bn who will be subjected to rigorous scrutiny as they have a higher potential of impacting the wider economy.
Mid sized firms also face a more flexible system but with greater scrutiny than those with less than £750m.
The change also wipes out the old rule which left firms facing an expensive cliff-edge upon breaching a NAV threshold. If a firm grew past its legal limit it would immediately lose its status and be forced to adopt a costly new structure.
Industry figures have welcomed the consultation after years of pushing the watchdog to make a change, allowing a greater shift in focus to client outcomes.
Jock Glover, chief executive of Independent Investment Management Initiative, said: “Measures that simplify reporting requirements, reduce unnecessary administrative burden and provide firms with greater flexibility should allow management teams to spend more time focused on delivering good outcomes for clients and less on reporting and processes that add limited value.”
Romin Dabir, partner at Reed Smith, said the change will also remove barriers which had prevented smaller managers from entering the UK market and marks a shift back to “more outcomes-based supervision”, which has become a focus of the FCA.
“The proposed new regime for the authorisation and supervision of the managers of private capital… looks to be consistent with the FCA’s new growth and competitiveness objective,” Dabir said.
The FCA’s consultation on the proposals will close on 22 September 2026.