FCA Proposes Sweeping Regulatory Easing for Smaller Private Equity and Hedge Funds to Bolster London’s Financial Hub
The UK’s Financial Conduct Authority (FCA) has unveiled plans for significant regulatory reforms aimed at enhancing the competitiveness and appeal of London as a leading centre for asset management.
On 7 April 2025, the FCA published proposals to substantially ease the regulatory burden on managers of alternative investment funds, including private equity and hedge funds. The initiative forms part of a broader strategy to strengthen the UK’s position in global financial markets following increasing international competition.
At the heart of the proposals is a dramatic increase in the threshold for so-called “full-scope” regulation — from the current level of approximately £100 million in assets under management to £5 billion. This recalibration would see a large number of fund managers reclassified as medium-sized firms, thereby exempting them from certain stringent regulatory requirements. These include, for example, the obligation to appoint depositories and to obtain additional authorisations from the FCA.
The FCA emphasised that this move reflects its commitment to a more proportionate regulatory framework — one that fosters innovation while maintaining high standards of investor protection and market integrity. Ashley Alder, Chair of the FCA, underlined in a recent speech that the regulator is working to recalibrate its rules for alternative investment fund managers to better reflect the specific conditions of the UK market. Importantly, the reforms seek to preserve the UK’s global connectivity and reputation for robust oversight.
Stakeholders are invited to submit feedback on the proposals by 9 June 2025, marking the start of a formal consultation process. The FCA stressed that this initiative demonstrates its ongoing commitment to review and modernise its regulatory framework to safeguard both investor protection and the long-term competitiveness of the UK financial services industry.
