FCA proposes significant reforms to solo-regulated firms’ remuneration codes: what CP26/27 means for these firms

Executive summary

On 15 July 2026, the FCA published Consultation Paper CP26/27, proposing significant reforms to the remuneration requirements applicable to solo-regulated firms, including UK Alternative Investment Fund Managers (AIFMs), UK UCITS management companies and MIFIDPRU investment firms.

The consultation forms part of the FCA’s wider programme to modernise the UK’s regulatory framework for solo-regulated firms, alongside the proposed reforms to the UK AIFM regime (CP26/28) and the new Fund Reporting for Asset Management Entities (FRAME) regime (CP26/26). Together, these consultations represent one of the most significant overhauls of the UK’s regulatory framework for asset managers and investment firms since Brexit.

Rather than fundamentally changing the FCA’s expectations around sound remuneration practices, CP26/27 seeks to simplify the existing framework by reducing unnecessary prescription, removing certain reporting and disclosure requirements and providing firms with greater flexibility in how they design and operate remuneration arrangements.

Whilst the proposals remain subject to consultation, they provide a clear indication of the FCA’s direction of travel. Firms should therefore begin considering how the proposed reforms may affect their remuneration framework, governance arrangements and internal policies.

Importantly, the FCA is not seeking to weaken remuneration governance. Instead, the consultation aims to simplify the existing rules whilst retaining the fundamental principles that encourage prudent risk management and align remuneration with firms’ long-term objectives.

Which firms and roles are likely to be affected?

The proposals are likely to affect a broad range of solo-regulated firms, including:

• UK Alternative Investment Fund Managers (‘AIFMs’);
• UK UCITS management companies;
• MIFIDPRU investment firms (i.e. Small and Non-Interconnected (‘SNI’) firms and non-SNI);
• Collective Portfolio Management Investment Firms (‘CPMIs’);
• Boards, remuneration committees and senior managers responsible for remuneration governance; and
• HR, compliance and risk functions involved in the design and oversight of remuneration arrangements.
  
   

Key proposals and what they mean for firms

Key proposals – general

• Simplify and consolidate the remuneration framework applicable to solo-regulated firms by replacing the existing AIFM, UCITS and MIFIDPRU remuneration codes (i.e. ‘SYSC 19B, 19E and 19G’ respectively) with a single, solo-regulated firms remuneration code (‘SYSC 19AA’). The MiFID remuneration and incentive provisions set out in SYSC19F will continue to apply.

• Apply the new code to all staff through general remuneration requirements, with additional targeted provisions for Material Risk Takers (‘MRTs’) to reflect their potential impact on firm outcomes.

• Narrow and focus the definition of MRT to include a staff member at a solo-regulated firm whose activities or remuneration incentives have a material impact on: 
  i) the firm’s conduct in relation to its clients and investors, 
  ii) the interests of the investors, the AIFs and the UCITS schemes, or 
  iii) its compliance with regulatory obligations.

• Replace fixed deferral structures with a principles-based requirement (with a threshold-based alternative consulted on).

• Retain malus and clawback as available tools but remove mandatory application requirements.

• Remove the requirement for mandatory remuneration committees and annual independent review, while retaining general governance and oversight expectations. 

Key proposals – MIFIDPRU investment firms

• Remove all Small and Non-interconnected (SNI) investment firms from remuneration requirements, so the new code would only apply to non-SNI MIFIDPRU investment firms.

• Remove the current tiered remuneration regime (i.e. basic, standard and extended remuneration requirements) and replace it with a single, focused framework under SYC19AA.

• Remove the requirement for MIFIDPRU investment firms to publish annual remuneration disclosures.

• Remove the MIF008 Remuneration Return.

What does this mean for MIFIDPRU investment firms?

For SNI investment firms, the proposed removal of the dedicated remuneration code would represent a significant simplification of the existing remuneration framework for these firms. SNI firms are reminded that the MiFID remuneration and incentive provisions in SYSC19F will still continue to apply to them.

For both SNI and non-SNI investment firms, the proposed removal of the MIF008 annual remuneration return and annual remuneration disclosure requirements set out in MIFIDPRU8 would reduce ongoing reporting and administrative obligations.

Non-SNI firms should also consider whether the proposed simplification of the remuneration framework provides opportunities to streamline existing policies, governance arrangements and internal procedures whilst continuing to meet the FCA’s regulatory expectations.

Key proposals – AIFMs and UCITS

Once AIFM reforms are implemented, SYSC 19AA’s remuneration requirements will only apply to ‘medium’ and ‘large’ AIFMs (i.e. AIFMs with NAV thresholds of £750 million to £5 billion, and over £5 billion respectively) and continue to apply to UK UCITS management companies, regardless of size.

What does this mean for UK AIFMs and UK UCITS?

UK AIFMs should consider whether their existing remuneration policies, governance arrangements and oversight processes remain appropriate under the proposed framework. The consultation may also provide an opportunity to simplify existing documentation whilst continuing to demonstrate sound governance and effective risk management.

UK UCITS management companies may wish to review their remuneration framework alongside their wider governance arrangements. Firms managing both UCITS and AIFs may also have an opportunity to streamline remuneration policies and governance across both business lines where appropriate.

UK AIFMs that also carry out MiFID activities (also referred to as CPMI firms) currently comply with the remuneration requirements set out in SYSC 19G and 19B. This consultation therefore presents an opportunity to review remuneration arrangements holistically and consider whether governance frameworks, policies and procedures can be better aligned across the business.

Governance remains central

Whilst the FCA proposes simplifying the remuneration framework, governance remains a fundamental regulatory expectation.

Boards and senior management will continue to be responsible for ensuring remuneration arrangements:

• Promote effective risk management;
• Discourage excessive risk-taking;
• Avoid conflicts of interest;
• Support good customer and investor outcomes; and
• Are appropriately documented, governed and subject to effective oversight.

Rather than reducing regulatory expectations, the FCA is placing greater reliance on firms’ governance arrangements and accountability.

Expected timelines

• Consultation closes: 16 September 2026

• FCA Policy Statement expected: Q1 2027

• Implementation timing will be confirmed in the Policy Statement

How Ocorian can help

The proposed reforms provide firms with an opportunity to review their remuneration framework, governance arrangements and compliance processes ahead of the final rules.

At Ocorian, we work with asset managers, investment firms and other solo-regulated firms to help them navigate regulatory change in a practical and proportionate way. Our regulatory specialists can support firms in assessing the potential impact of the FCA’s proposals and preparing for implementation.

Our services include:

• Regulatory impact assessments to identify how the proposed reforms may affect your business.
• Remuneration framework reviews, including policies, procedures and governance arrangements.
• Gap analysis against the proposed FCA requirements and industry good practice.
• Board and remuneration committee governance reviews, including terms of reference, oversight arrangements and decision-making processes.
• Policy and documentation updates to reflect the evolving regulatory framework.
• Implementation planning to support firms in transitioning to the new requirements once finalised.
• Ongoing regulatory advice on remuneration, governance and wider UK regulatory reforms, including the new UK AIFM regime and FRAME reporting.

With extensive experience of advising a wide spectrum of firms, Ocorian is well placed to help firms navigate these reforms with confidence and ensure their remuneration arrangements remain proportionate, effective and aligned with regulatory expectations.

If you would like to discuss how the proposals may affect your business, please contact Ocorian’s Regulatory Consultants via Ocorian’s website.

About the authors

Abi Reilly is a Partner at Ocorian. She advises a broad range of regulated firms, including asset managers, on regulatory compliance and governance. With over 20 years holding senior in-house risk and compliance roles and 40 years in financial services, Abi has significant experience in helping firms navigate complex regulatory requirements with practical commercial advice.

Kaniz Gatt is a Principal Consultant in Ocorian’s Regulatory and Compliance team. She advises UK and Third Country AIFMs on AIFMD compliance, Annex IV reporting and National Private Placement Regime (‘NPPR’) requirements. Her experience includes supporting firms with regulatory reporting obligations across multiple jurisdictions, helping clients interpret complex reporting requirements, implement practical compliance solutions and navigate the evolving regulatory landscape.

Ronnie Kwok is a Managing Consultant at Ocorian. He advises AIFMs, investment managers, corporate finance advisors and placing agents on regulatory compliance, FCA authorisations and governance. Ronnie specialises in helping firms establish effective compliance frameworks, manage regulatory risk and navigate regulatory change, providing pragmatic, commercial advice through the business cycle.