The UK's Financial Conduct Authority (FCA) is in full swing with ambitious regulatory reforms, aimed at boosting the competitiveness of the asset management sector while safeguarding market...
The UK's Financial Conduct Authority (FCA) is in full swing with ambitious regulatory reforms, aimed at boosting the competitiveness of the asset management sector while safeguarding market integrity. For Alternative Investment Fund Managers (AIFMs), advisory firms and investment managers, this means a landscape of opportunities, but also a minefield of challenges. The removal of the small registered AIFM category, streamlined Senior Managers and Certification Regime (SMCR) updates, and tweaks to MiFID research payments are game-changers. Yet with application timelines stretching 6 to 12 months and costs mounting, getting it wrong can delay launches or trigger costly revisions.
At Fundsure, we help hedge fund managers and investment firms cut through the red tape with fixed-fee authorisation packages. Below we break down the top issues based on the latest FCA consultations.
Challenge 1: The End of the Small Registered AIFM Era
One of the biggest shifts is the abolition of the small registered AIFM regime. Previously, managers with assets under management below certain thresholds could operate with lighter-touch reporting. Now, all must seek full authorisation or qualify for exemptions, meaning a surge in applications and heightened scrutiny on governance and risk management.
- Resource strain. Small AIFMs must now demonstrate full AIFMD compliance, including appointing a depositary and robust valuation processes, which can overwhelm startups with limited teams. Firms cannot operate as letter-box entities or solely provide AIFM management functions without substance.
- Timeline crunch. With the FCA targeting 6 to 9 months for AIFM approvals, delays from incomplete business plans (for example missing financial projections) are common. Get it wrong first time, say by omitting evidence of equity injection, and the FCA's statutory 12-month clock can reset from the resubmission date.
- Cost escalation. Expect significant FCA fees plus further cost for policies and SMF screenings. For full-scope UK AIFMs, you will need to submit Form A for SMFs alongside a detailed regulatory business plan covering AIFMD reporting and delegation models.
Challenge 2: SMCR Reforms, Streamlined but Still a Headache
The FCA's reforms introduce welcome tweaks to SMCR, like extending criminal record check validity and reducing pre-approval SMFs for non-enhanced firms. But for AIFMs and investment managers, appointing at least two SMFs (for example SMF16 for Compliance Oversight and SMF17 for MLRO) remains non-negotiable, with fit-and-proper assessments now under tighter scrutiny.
- Talent shortages. Finding fit-and-proper SMFs amid a competitive market is tough, especially with the emphasis on learning and development plans requiring several courses annually on topics like AML and Conduct Rules.
- Query overload. FCA queries on SMF competence can drag assessments out, with iterative rounds. Incomplete Form A submissions, lacking three-year financial forecasts or client money account details, can reset the target timeline.
- Enhanced thresholds. Firms crossing higher thresholds for headcount or revenue face stricter rules, catching growing advisory firms off-guard.
Challenge 3: MiFID Top-Ups and Research Payments
For advisory firms and investment managers seeking MiFID top-up permissions, the green light on joint research and execution payments is a boon, allowing bundled services with clear guardrails. But client categorisation and conflicts policies must be airtight.
- Complexity in hybrid models. AIFMs adding MiFID advisory face dual regimes, with the FCA demanding evidence of suitability assessments and operational controls. Permissions such as arranging deals in investments or managing investments require alignment with your Investment Management Agreement.
- Research budget scrutiny. New rules require transparent allocation, but mid-sized firms can struggle with documentation, risking delays.
- Cross-border snags. Post-Brexit, non-UK AIFs need reverse-solicitation clarity, complicating applications for international managers.
Why 2025 Is Your Year to Act
These challenges are not insurmountable, but they demand proactive planning. Authorised firms will gain a competitive edge in attracting institutional capital. The trickiest part is nailing it first time, as FCA applications are unforgiving; even minor omissions can reset the target to a full 12 months. We have seen firms lose months to resubmissions over an incomplete Form A or overlooked client money policies. That is where Fundsure helps. Our fixed-fee packages bundle SMF screenings, policies and FCA query support, and we use the FCA's Financial Analysis Template for forecasts to keep you on track. Post-approval, our retainers include ongoing training to maintain compliance. For bespoke advice, contact us.