The Financial Conduct Authority (‘FCA‘) has published a consultation on proposed reforms to the remuneration rules for certain FCA solo-regulated firms.
The consultation (CP26/27) opened on 14 July 2026 and closes on 16 September 2026. It forms part of the FCA’s wider move towards a simpler and more proportionate regulatory framework, while retaining a focus on sound governance, good conduct and the alignment of remuneration with the interests of clients, funds and investors.
Key Proposals
Creation of a single remuneration code
The central proposal is to replace the existing AIFM Remuneration Code, UCITS Remuneration Code and MIFIDPRU Remuneration Code with a single new Solo-Regulated Firms Remuneration Code. The new code would sit in SYSC 19AA and apply to in-scope firms, including full-scope UK Alternative Investment Fund Managers (‘AIFMs’), UK UCITS management companies and MIFIDPRU investment firms that are not small and non-interconnected. Smaller firms would be outside scope, including small and non-interconnected MIFIDPRU investment firms and sub-threshold AIFMs. The FCA also proposes to revoke non-Handbook guidance associated with the existing AIFM and MIFIDPRU remuneration regimes.
Shift towards an outcomes-focused regime
The proposals are not simply a consolidation exercise. The FCA is proposing to move away from detailed and prescriptive remuneration rules towards a more outcomes-focused regime. In practice, this would give firms greater flexibility to design remuneration structures that are appropriate for their business model, risk profile and investor base, provided they can demonstrate proper governance and accountability.
Proportionality, governance and accountability
A key feature of the new regime would be an overarching proportionality requirement, whereby remuneration policies and practices must be appropriate for, and proportionate to, the nature, scale and complexity of the firm’s business model and the risks arising from its activities. Firms would also need to establish remuneration policies and practices that support good conduct and a healthy culture, promote sound and effective risk management, and align remuneration with relevant client, fund and investor interests. The proposals would also retain specific expectations for governance, record keeping and the remuneration of staff in control functions.
Revised material risk taker (‘MRT’) definition
The FCA is also proposing a revised definition of “material risk taker”. A staff member would be an MRT where their professional activities or remuneration incentives have a material impact on the firm’s conduct in relation to its clients or investors, the interests of AIFs or UCITS schemes and their investors, or the firm’s compliance with regulatory obligations. The FCA expects the revised test may reduce the number of MRTs, although the breadth of the wording means firms will still need to assess the position carefully.
More flexible approach for MRT remuneration
For MRTs, the proposed approach would be less prescriptive than the current regime. Existing mandatory requirements on deferral, malus and clawback are proposed to be replaced with broader principles-based expectations. Firms would still need to consider and, where appropriate, apply these mechanisms, but the FCA’s preferred option would leave management bodies to decide the form, scope and duration of any deferral arrangements. The consultation also asks for views on an alternative threshold-based approach under which mandatory deferral would apply to larger firms.
Removal of certain process requirements
The proposals would also remove some existing process requirements. The FCA proposes to remove the prescriptive requirement for a remuneration committee at larger solo-regulated firms, and in-scope firms would no longer be required to carry out a formal annual review of their remuneration policies and practices. However, firms would still need to maintain appropriate governance and oversight of their remuneration arrangements.
Implementation and Next Steps for Firms
If adopted, the revised framework is expected to come into force the day after the FCA publishes its policy statement, currently anticipated in Q1 2027. The new rules are expected to be subject to transitional provisions and staged implementation for AIFMs alongside wider AIFM reforms.
In-scope firms should monitor the consultation and begin considering how their remuneration governance, MRT identification process and variable pay frameworks may need to be adapted under the new regime. Responses to the consultation can be submitted here.
