UK: Implications of FCA’s overhaul of AIFM regime for cross-border distribution of funds

Why should I read this?

On 14 July 2026, the FCA published Consultation Paper CP26/28, “The UK AIFM Regime”. The paper sets out detailed proposals for a new UK regulatory framework for Alternative Investment Fund Managers (AIFMs). 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 of the entire package is expected to be in 2028.

This briefing considers the implications of the reforms for those involved in the cross-border distribution of funds.

Lindi Rudman, Legal Director in the Financial Services Team and Head of FS+, comments:

“CP26/28 confirms that the National Private Placement Regime will remain the main route for AIFMs marketing funds into the UK from overseas. That will be a relief for cross-border managers. The mechanics of that route will remain a notification-based approach for these managers, with only limited changes proposed to ensure the regime operates effectively. The FCA is set to gain stronger powers to police compliance. Overseas AIFMs marketing into the UK should see this as the part of CP26/28 that affects them most directly.”

See our other client briefings:

• UK: FCA’s major overhaul of the AIFM regime (CP26/28)
• UK: FCA consults on a new Fund Reporting Framework for Asset Managers (FRAME)

What should I do?

Fund managers that market funds into the UK from overseas should start assessing the impact of CP26/28 now, given the scale of the proposed changes and the lead time needed for some transitions:

• Review your National Private Placement Regime (NPPR) marketing notifications

Confirm that your existing marketing notifications will carry over to the new regime, and check that your processes can meet the notification-based approach once the 20-day notice period is removed for authorised UK AIFMs seeking to market a UK AIF.

• Map your funds against the NPPR and the OFR

Check whether any funds you market into the UK should use the Overseas Funds Regime (OFR) instead of the NPPR, particularly funds aimed at retail investors.

• Strengthen your ongoing compliance monitoring

Review your supervisory co-operation arrangements, investor disclosures and reporting, since the FCA is set to gain stronger powers to suspend or revoke marketing rights for non-compliance.

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

New tiers – not relevant to non-UK funds

CP26/28 proposes replacing the current two-tier (small/full-scope) AIFM regime with three NAV-based tiers: small (below £750 million), medium (£750 million to £5 billion) and large (above £5 billion). These tiers apply to UK AIFMs, so Gibraltar and overseas managers marketing into the UK under the NPPR are not directly affected. Gibraltar AIFMs will continue to be regulated under their own Gibraltar authorisation and the Gibraltar Access Regime (GAR)/NPPR marketing conditions, and third country AIFMs are subject to NPPR-based marketing requirements, with the £750 million figure relevant only to the limited “small third country AIFM” reporting distinction rather than a full three-tier classification. The change matters most for cross-border groups that include a UK AIFM, since it affects that entity’s overall compliance obligations.

Cross-border marketing and the NPPR

HM Treasury plans to retain the NPPR which most firms say works well. It proposes restating the substantive NPPR requirements in new legislation, with only minor changes. The FCA’s role becomes more limited. Because the core NPPR requirements will sit in secondary legislation, the FCA proposes guidance in the new ALTS sourcebook to help firms apply them.

Gibraltar

The NPPR will continue to apply to full-scope UK and Gibraltar AIFMs marketing non-UK or non-Gibraltar AIFs in the UK. It will continue to apply to non-UK and non-Gibraltar AIFMs marketing any AIFs in the UK, including feeder AIFs. If the NPPR applies, AIFs can be marketed mainly to professional investors in the UK. Firms must meet minimum requirements based on the Alternative Investment Fund Managers Directive (AIFMD).

Notification based NPPR

Authorised UK AIFMs will notify the FCA before marketing a UK AIF, rather than seek permission first. The current 20-day notice period before marketing starts will be removed. AIFMs will still need to notify the FCA before marketing, give details of the relevant fund, and confirm that appropriate supervisory co-operation arrangements are in place. AIFMs will need to confirm that the fund and the AIFM are not established in a jurisdiction flagged as high-risk by the Financial Action Task Force (FATF).

Depositary

UK and Gibraltar AIFMs marketing third-country AIFs will still need to appoint one or more persons to perform depositary functions for the fund. Third-country AIFMs marketing into the UK will still need to notify the FCA, make investor disclosures, submit regulatory reports and pay FCA fees. These obligations will not stop once marketing begins. They will run from the date of FCA notification until the last investor who subscribed disposes of their interest.

FCA powers

The FCA may gain enhanced powers to suspend or revoke marketing rights where an AIFM fails to comply with NPPR requirements. This strengthens the FCA’s ability to police ongoing compliance.

No passporting

The NPPR remains a UK-specific regime and does not create any passporting rights outside the UK. Cross-border managers should still check the local marketing, pre-marketing, financial promotion, investor categorisation and reporting rules in each country where they market a fund.

Overseas Funds Regime (OFR)

For fund managers of EEA UCITS that do not have a Money Market Fund (MMF) in their range, the OFR is winding down. For those fund managers who have obtained UK authorisation as they exited the OFR, they no longer need to consider how to distribute into the UK from overseas and neither the OFR or NPPR are relevant. For fund managers in the OFR with a EEA UCITS authorised as MMFs in their range, those will remain in the temporary marketing permissions regime (TMPR). If it has been established as an alternative investment fund, it can potentially be notified under the NPPR. 

Delegation

The FCA proposes keeping the core delegation rules, including the rule that a firm cannot become a letter box entity through delegation. It proposes removing the need for prior FCA approval before a firm delegates risk or portfolio management to an unauthorised entity. Firms will instead notify the FCA as soon as practicable after the delegation takes effect, and confirm the arrangement through Fund Reporting for Asset Management Entities (FRAME) reporting. A new, narrower category called additional core AIFM functions will cover delegation of valuation, compliance monitoring and marketing. Firms must still justify their delegation model with objective reasons.

Our view

The retained NPPR gives cross-border managers welcome continuity. The move to a notification-based approach, including for UK authorised AIFMs, removes a procedural hurdle, since firms will no longer wait for FCA permission before marketing. The changes are not simply administrative, though. Ongoing NPPR compliance will matter more, given the FCA’s proposed powers to suspend or revoke marketing rights. Firms should use the consultation period to review their NPPR notifications, supervisory co-operation arrangements and investor disclosures now, rather than wait for the final rules in 2027.

Lindi Rudman, Legal Director in the Financial Services Team and Head of FS+, comments:

“The retention of the NPPR will come as a relief to cross-border managers. This is not simply business as usual, though. Firms will move from seeking permission to a notification-based approach. The 20-day notice period will disappear for authorised UK AIFMs seeking to market a UK AIF. The FCA is set to gain stronger powers to suspend or revoke marketing rights for non-compliance, so ongoing monitoring of NPPR conditions matters more than ever. Through FS+, we help managers assess how changes interact with the local marketing, disclosure and reporting rules in each jurisdiction where they market their funds, and put in place the notifications and supervisory arrangements the reformed regime requires.”

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, covering depositaries, prime brokers and 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 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 the consultation. We can help with your response or we can include your comments with ours on an attributed or anonymous basis.

How Eversheds Sutherland and FS+ 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, depositaries and their boards on the full range of UK regulatory change, including the AIFMD ‘repeal and replace’ programme. We can help you work out your obligations and review your valuation, depositary and delegation arrangements.

FS+ is our specialist solution for global fund distribution activities. FS+ brings together lawyers and local counsel across Europe, the Americas and Asia Pacific to advise on fund registration, passporting and private placement. FS+ can help you review your NPPR notifications, track local marketing, disclosure and reporting rules in each country where you distribute funds, and manage your ongoing compliance obligations. FS+ publishes monthly country updates on fund marketing and distribution developments worldwide, and maintains a digital tracker of AIFMD II implementation across the EU.