By Rose Jakeman, David Speakman and Angela Hayes
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Published 16 July 2026
The Financial Conduct Authority (FCA) has published its highly-anticipated consultation on proposed reforms to the remuneration rules for solo-regulated firms, which aim to simplify the rules, reduce the regulatory burden on firms, and support international competitiveness.
As we reported last year, the FCA has already updated its remuneration rules for banks, with simplification and proportionality the name of the game. The consultation on proposed changes to the rules for solo-regulated firms has a similar impetus and we expect the proposals to be widely welcomed across solo-regulated firms.
Proposed changes
The FCA's key proposals are as follows:
1. Single Remuneration Code for solo-regulated firms: The FCA is proposing to replace the three existing remuneration codes (the AIFM Remuneration Code, the UCITS Remuneration Code, and the MIFIDPRU Remuneration Code) with a single, consolidated, and consistent code for in-scope solo-regulated firms.
2. Narrower application in terms of in-scope firms: The FCA proposes to remove certain firms from the scope of the remuneration regime altogether. The new code will therefore only apply to medium and large AIFMs, UK UCITS management companies, and MIFIDPRU investment firms that are not small and non-interconnected MIFIDPRU investment firms.
3. Outcome-focused approach: The proposed new code will move away from prescriptive rules to a more outcomes-focused framework, focusing on remuneration practices that promote good conduct and healthy culture, align remuneration with the interests of clients, funds and investors, and promote sound and effective risk management. It will include general remuneration requirements applicable to all staff and additional targeted provisions for material risk takers (MRTs), reflecting their greater potential impact on the firm's risk profile or client and investor outcomes.
4. Narrower definition of an MRT: The definition of MRT will be narrowed, which the FCA anticipate leading to a reduced number of individuals identified as in scope (although the proposed definition is broadly drafted). The proposed definition would capture staff members whose professional activities or remuneration incentives have a material impact on any of:
- The firm's conduct in relation to its clients and investors
- The interests of investors, AIFs, or UCITS schemes
- The firm's compliance with regulatory obligations
5. Greater flexibility in deferral provisions: The FCA intends to allow firms more flexibility by replacing fixed deferral structures with a principles-based requirement. Its preferred option is for prescribed minimum deferral periods and fixed structures to be replaced with an ability for firms to design their own policies overseen by the management body, supporting effective oversight of remuneration outcomes. The alternative approach would apply mandatory deferral and minimum deferral periods to firms above specified thresholds, with the possibility of adopting the proportionality framework for dual-regulated firms. The FCA seeks firms' views on their preferred approach.
6. Removal of mandatory malus and clawback provisions: The FCA is proposing to require firms to consider the use of malus and clawback as performance adjustment mechanisms to support good conduct, compliance and risk management, without making them mandatory.
7. Removal of governance and reporting requirements: The FCA is proposing to remove requirements for firms to establish remuneration committees and conduct formal annual remuneration reviews, replacing these with a requirement on firms to ensure their remuneration arrangements are subject to appropriate governance and oversight. The FCA is also proposing to revoke the existing MIFIDPRU remuneration reporting and disclosure requirements, instead requiring firms only to maintain appropriate records.
Timeline
The consultation closes on 16 September 2026 and the FCA anticipates publishing a policy statement in Q1 of 2027. The policy statement would come into force the day after publication and would apply to remuneration relating to performance periods beginning on or after the commencement date.
For AIFMs, this consultation sits alongside the FCA's wider AIFM reform, which includes changes to definitions and thresholds used to categorise AIFM firms. The new code would therefore be applied to AIFMs in two stages: initially to full scope AIFMs, with application extending to medium and large UK AIFMs once the AIFM reforms take effect.
Impact
These proposals are likely to be widely welcomed by solo-regulated firms, addressing the complexity of the existing rules and offering firms additional flexibility in their remuneration policies.
For further information or to discuss your remuneration approach in light of these proposals, please contact one of our employment regulatory experts.
