UK FCA consults on remuneration rules reform for solo-regulated firms

The UK Financial Conduct Authority (FCA) published consultation paper CP26/27, amongst a package of consultations on modernising the UK asset management regulatory framework. The consultation is to be read alongside HM Treasury's proposed reforms to the legislative framework for the UK alternative investment fund manager (AIFM) regime.

In this consultation, the FCA proposes a significant overhaul of the remuneration regime for solo-regulated firms. The FCA proposes replacing the existing remuneration codes for AIFMs, Undertakings for Collective Investment in Transferable Securities (UCITS) management companies and MiFID Prudential Sourcebook (MIFIDPRU) investment firms with a single, consolidated remuneration code (SYSC 19AA). The proposals would move away from detailed, prescriptive requirements towards a more outcomes-focused and proportionate framework, placing greater reliance on firms' governance arrangements and management body oversight.

In addition, the FCA proposes to simplify and update definitions and terminology to reflect the new code and the removal of the existing ones, make consequential amendments across the Handbook (including to the glossary, Senior Management Arrangements, Systems and Controls and other relevant sourcebooks), and set out transitional and sequencing arrangements, including how the new code would apply alongside forthcoming changes to the AIFM framework, so that firms are clear about how and when requirements would take effect. The FCA also proposes to revoke existing non-Handbook guidance where no longer relevant and incorporate elements into the new code.

The deadline for comments is 16 September. The final rules are expected to apply the day after the final policy statement is published in Q1 2027. The new code would apply from that date to remuneration relating to performance periods beginning on or after the commencement date. For AIFMs, and to align with the wider AIFM reform, part of which includes changes to the definitions and thresholds used to categorise AIFM firms, the new code would apply in two stages—initially to full scope UK AIFMs from the commencement date in Q1 2027, and subsequently to medium and large UK AIFMs once the AIFM reforms take effect.

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