Key Takeaways
- • The FCA published consultation paper CP26/16 on 21 May 2026 proposing rule changes to permit depositaries of authorised Alternative Investment Funds (AIFs) to delegate registration and custody functions to third parties, addressing a practical misalignment between current COLL and AIFMD-derived rules.
- • The proposals would allow depositaries to delegate their Collective Investment Schemes Sourcebook (COLL) registration function for non-safe custody assets (including real estate and partnerships) to AFM affiliates only, with new investor protections embedded in the framework.
- • For safe custody investments that are not AIF custodial assets, the FCA proposes permitting delegation of both COLL registration and Client Assets Sourcebook (CASS) 6 custody functions, expanding operational flexibility for fund managers.
- • The FCA explicitly positions private markets investment—comprising real estate, infrastructure, private credit, and private equity—as vital to UK economic growth, framing the rule changes as necessary to preserve authorised AIFs' practical ability to access these asset classes while maintaining investor protection standards.
- • The consultation represents the FCA's effort to resolve legal and operational constraints that currently prevent delegations under AIFMD provisions, creating efficiency gains for fund managers managing large alternative asset portfolios.
Summary
On 21 May 2026, the Financial Conduct Authority published consultation paper CP26/16 addressing operational and regulatory constraints affecting authorised Alternative Investment Fund managers' access to private markets. The consultation targets a specific regulatory gap: current rules derived from the Alternative Investment Fund Managers Directive (AIFMD) do not permit depositaries of authorised AIFs—when managed by full-scope Authorised Investment Fund Managers—to delegate certain registration and custody functions to third parties, creating practical inefficiencies in fund administration.
The FCA's proposed amendments would permit two categories of delegation. First, depositaries could delegate their COLL registration function for assets classified as neither safe custody investments nor AIF custodial assets (such as immovable property and non-CIS partnerships). Second, for safe custody investments excluding AIF custodial assets, depositaries could delegate both COLL registration and CASS 6 custody functions. Critically, delegation of non-safe custody assets would be restricted to AFM affiliates only, with the FCA introducing new protective measures for fund investors where such delegation occurs.
The FCA framed the consultation within a strategic policy objective: preserving UK competitiveness in private markets investment. The authority emphasized that private real estate, infrastructure, private credit, and private equity are essential to UK economic growth and the UK financial sector's global standing. By removing operational friction while maintaining investor safeguards, the FCA seeks to enable authorised AIFs to compete effectively in private markets without compromising fiduciary standards.
The consultation reflects a narrowly targeted regulatory refinement rather than a fundamental regime overhaul. The proposals acknowledge existing AIFMD constraints while proposing rule changes at the national level to facilitate operational delegation within clearly defined parameters. Fund managers, depositaries, and alternative asset allocators are expected to respond during the consultation period, providing feedback on the adequacy of proposed protections and the practical feasibility of the delegation framework across diverse asset classes.
The FCA's proposed amendments would permit two categories of delegation. First, depositaries could delegate their COLL registration function for assets classified as neither safe custody investments nor AIF custodial assets (such as immovable property and non-CIS partnerships). Second, for safe custody investments excluding AIF custodial assets, depositaries could delegate both COLL registration and CASS 6 custody functions. Critically, delegation of non-safe custody assets would be restricted to AFM affiliates only, with the FCA introducing new protective measures for fund investors where such delegation occurs.
The FCA framed the consultation within a strategic policy objective: preserving UK competitiveness in private markets investment. The authority emphasized that private real estate, infrastructure, private credit, and private equity are essential to UK economic growth and the UK financial sector's global standing. By removing operational friction while maintaining investor safeguards, the FCA seeks to enable authorised AIFs to compete effectively in private markets without compromising fiduciary standards.
The consultation reflects a narrowly targeted regulatory refinement rather than a fundamental regime overhaul. The proposals acknowledge existing AIFMD constraints while proposing rule changes at the national level to facilitate operational delegation within clearly defined parameters. Fund managers, depositaries, and alternative asset allocators are expected to respond during the consultation period, providing feedback on the adequacy of proposed protections and the practical feasibility of the delegation framework across diverse asset classes.
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