UK: Implications of the FCA’s overhaul of AIFM regime for authorised funds and the new FRAME reporting model

For a discussion of the implications of the new AIFM regime for private funds, see our recent briefing:

• UK: Private fund managers and the FCA overhaul of the AIFM regime

Why should I read this?

On 14 July 2026, the FCA published Consultation Paper CP26/28, “The UK AIFM Regime”, and Consultation Paper CP26/26, “Fund Reporting for Asset Management Entities (FRAME)”. The papers set out proposals for a new UK regulatory framework for AIFMs and proposals for a new reporting framework for UK funds. HM Treasury published a parallel consultation on a draft Statutory Instrument (SI), the Alternative Investment Fund Managers Regulations 2026, together with a policy note. 

Implementation is expected to be in 2028.

This briefing looks at the implications of the reforms for managers of UK authorised funds.

Michaela Arter, Partner in the Financial Services Team, product Group Head and European Head of Financial Services Sector, comments:

“The UK AIFM Regime proposals leave the COLL rules for NURS, QIS and LTAFs untouched for now, but that is no reason for authorised fund managers to relax. FRAME brings genuinely new reporting duties, and such reporting is a first for many firms managing UK UCITS. Leverage reporting changes will affect authorised AIFs, and the valuation changes reach every authorised fund. Managers should start mapping their FRAME obligations and reviewing their valuer contracts well ahead of the anticipated 2028 start date.”

What should I do?

Fund managers should start assessing the impact of CP26/28 and CP26/26 now, given the scale of the proposed changes and the lead time needed for some transitions:

• Map your FRAME reporting obligations

Check which of the FRAME essential and enhanced reporting requirements will apply to your funds, and start planning any system and data changes needed prior to implementation.

• Review your valuation arrangements

In light of the proposal to remove the statutory strict liability for valuers (see the paragraph “Valuation” below), check contracts and engagement letters with external valuers now, as in the absence of statutory strict liability, the main protection for investors will be their contractual terms and conditions.

• Reassess your AIFM tier under the proposals

Remember that the NAV of your NURS, QIS and LTAF business counts towards your firm’s AIFM tier.

• Engage with the relevant CP26/28 discussion chapters

By the 18 September 2026 consultation deadline, particularly if you are affected by the removal of the AIFM business restriction.

• Engage with the CP26/26 FRAME consultation

By the 22 September consultation deadline, particularly if you are affected by the extension of fund level reporting to UCITS.

• Consider your CP26/28 consultation response

By the 14 October 2026 consultation deadline, focusing on the threshold levels, the transitional ‘cliff-edge’ mitigations and the prudential discussion chapter, either directly or through trade body engagement.

• Watch for the second consultation

Expected in late 2026 or 2027, it will set out detailed rule changes for NURS, QIS, LTAF and depositary requirements, so plan resource for further developments and a further response.

What do I need to know about the UK AIFM Regime?

Scope: private funds versus authorised funds

Most of the new rules in the proposed Alternative Investment Funds sourcebook (ALTS) apply only to managers of unauthorised alternative investment funds, i.e. private funds and listed funds. Reforms to those authorised fund regimes are reserved for a second consultation. The rules for authorised funds, including NURS, QIS and LTAFs, are currently in the existing COLL and FUND sourcebooks. However, we will understand better where the relevant rules in FUND will move to once we see the second consultation. Managers that manage both authorised and unauthorised funds will need to work with both rulebooks going forward.

Who feels the effect now

Two proposed changes will reach across the whole AIF population straight away. HM Treasury’s draft law removes the statutory strict liability regime for external valuers for all AIFs, not only unauthorised funds. It also repeals the Level 2 Regulation methodology for calculating leverage, which currently applies to all funds under the AIFMD Annex IV reporting regime. 

FRAME: new reporting for authorised funds

The related consultation, CP26/26, proposes a new fund reporting framework called Fund Reporting for Asset Management Entities (FRAME). FRAME applies to UK UCITS, NURS, QIS and LTAFs, not just unauthorised funds. UK UCITS have not faced comparable fund-level reporting before, so this is a new obligation for UK UCITS fund managers. Under the proposals, NURS, QIS and LTAF managers would move from AIFMD Annex IV reporting to new FRAME templates, with quarterly reporting and a 30-day lag for most fund types. Authorised fund managers should start budgeting for the system and process changes FRAME will need.

Valuation

The FCA wants valuation rules that are more robust, with clear records of how valuation decisions are made and when ad hoc valuations are needed. It proposes removing the statutory concept of an external valuer and the strict liability that comes with it, following feedback that the market for external valuers is not working well. Valuers will still face liability under ordinary contract and negligence law, and under professional indemnity arrangements, but the special statutory backstop will go. This change applies to all AIFs, including LTAFs and QIS holding hard-to-value assets. Authorised fund managers and their depositaries should review valuation agreements and engagement letters now to understand their contractual position on liability.

Leverage

The FCA proposes scrapping the current gross and commitment method leverage calculations. It says these methods are complex and do not always show the true risk in a fund. Firms will disclose their leverage using a method suited to their fund and strategy, provided the disclosure is clear, fair and not misleading. The FRAME consultation paper (CP26/26) will ask managers to report raw leverage data instead, so the FCA can apply its own calculations. The COLL borrowing and leverage limits that apply to NURS, QIS and LTAFs are not changing.

Risk management and liquidity

The current risk management rules for authorised funds are not changing in this round. Separately, the FCA is consulting on requiring UK UCITS and NURS operators to have anti-dilution tools in place, and plans further proposals on NURS invested mainly in illiquid assets, such as NURS real estate funds. Authorised fund managers running these funds should watch both work streams closely.

Delegation

The delegation regime for authorised funds under COLL is not changing in this consultation. The FCA will consider the position for authorised funds as part of the second consultation.

Depositaries

The FCA is not proposing any changes to the COLL depositary regime for authorised funds. Detailed depositary proposals for authorised funds are expected in the second consultation.

Business restriction

The current rules stop a full-scope UK AIFM from carrying on much beyond managing funds and closely related services. The FCA sets out four options:

• apply the restriction to all authorised AIFMs;

• keep it for medium and large AIFMs only;

• modify it to align with other rules; or

• remove it entirely.

The FCA’s preferred option is to remove the restriction altogether, relying instead on the wider prudential, conduct and governance framework to manage risk. This discussion chapter closes on 18 September 2026, and firms with dual AIFM and Markets in Financial Instruments Directive (MiFID) structures should consider responding. The equivalent UK UCITS business restriction is not addressed here, so managers that are both a UK UCITS management company and an AIFM will need to work out which restriction applies to which activity.

Prudential regime

The FCA is looking at prudential requirements for AIFMs, UK UCITS management companies and residual CIS operators together. It considers the current framework too complex, inconsistent and incomplete, and wants a more consistent capital framework. Removing the AIFM business restriction should also cut the dual compliance costs that currently fall on firms holding both AIFM and MiFID permissions. This chapter is directly relevant to UK UCITS fund managers, since it is the first sign of a wider look at how prudential rules apply to them. A roundtable is planned for September 2026, with a deadline of 14 October 2026 for responses to the consultation.

Our view

The proposals that matter most for authorised funds now are FRAME, the repeal of the statutory strict liability of external valuers and the repeal of the leverage calculation methodology, since these apply across all authorised funds. The second consultation, expected in late 2026 or early 2027, is set to cover reforms to the NURS, QIS and LTAF regimes, detailed depositary rules and any changes needed to COLL following the repeal of the Level 2 AIFMD Regulation. 

Julian Brown, Partner in the Financial Services Team, comments:

“This first consultation was never going to be where the real change for authorised funds happens, and firms should not mistake the calm for the final word. The second consultation, due in late 2026 or 2027, will reset the NURS, QIS and LTAF regimes and set out the detailed depositary rules that the proposals currently leave untouched. Managers should plan to be ready to respond properly once that paper lands.”

Next steps

You can comment on CP26/28’s main proposals and the prudential discussion chapter until 14 October 2026. Comments on the other discussion chapters, including the business restriction, are due by 18 September 2026. You can send technical comments on HM Treasury’s draft Statutory Instrument to AIFMR@hmtreasury.gov.uk until 14 October 2026. 

The related FRAME consultation, CP26/26, closes on 22 September 2026. Managers with views on the new reporting requirements should consider responding directly.

The FCA expects to publish a policy statement and final Handbook rules in 2027, alongside HM Treasury’s finalised legislation, ahead of the target implementation date of 2028. We will be responding to CP26/28. We can help with your response or we can include your comments with ours on an attributed or anonymous basis.

How Eversheds Sutherland can help

Eversheds Sutherland is a leading legal adviser to the investment funds sector in the UK, Luxembourg and Ireland. Our funds team advises AIFMs, UK UCITS management companies, depositaries and their boards on the full range of UK regulatory change. We can help managers map their FRAME reporting obligations and plan the system and process changes needed. We can review valuation agreements and engagement letters with external valuers, and advise on the contractual position once the statutory liability regime falls away. We can help you work out your firm’s AIFM tier, including where authorised and unauthorised funds sit together, and prepare a response to the discussion chapters or the second consultation, whether individually, or through a trade body.