Navigating the 2025 FCA Authorisation Maze: Key Challenges for AIFMs, Advisory Firms, and Investment Managers

16 Sept

As we hit the midpoint of 2025, the UK's Financial Conduct Authority (FCA) is in full swing with its ambitious regulatory reforms, aimed at boosting the competitiveness of the asset management sector while safeguarding market integrity. For Alternative Investment Fund Managers (AIFMs), advisory firms, and investment managers, this means a landscape of opportunities—but also a minefield of challenges. The removal of the "small registered AIFM" category, streamlined Senior Managers and Certification Regime (SM&CR) updates, and tweaks to MiFID II research payments are game-changers. Yet, with application timelines stretching 6–12 months and costs piling up to £30,000–£75,000 (including FCA fees of £2,720–£10,880), getting it wrong can delay launches or trigger costly revisions.

At Fundsure, we help numerous hedge fund managers and investment firms cut through the red tape with our fixed-fee authorisation packages (£6,500–£12,000). In this post, we'll break down the top issues and challenges based on the latest FCA consultations (like CP25/21 and the April 2025 AIFM review). If you're plotting your 2025 authorisation journey, reach out to us directly at support@fundsure.co.uk or call 02078988522 for a no-obligation chat.

Challenge 1: The End of the "Small Registered AIFM" Era – A Wake-Up Call for Smaller Managers

One of the biggest shifts in 2025 is the abolition of the small registered AIFM regime, effective from the Treasury's response to the June 2025 consultation. Previously, managers with assets under management (AuM) below €500m (unleveraged) or €100m (leveraged) could operate with lighter touch reporting. Now, all must seek full authorisation or qualify for exemptions like SEFs or RVE CAs—meaning a surge in applications and heightened scrutiny on governance and risk management.

Key Issues:

Resource Strain: Small AIFMs must now demonstrate full AIFMD compliance, including appointing a depositary and robust valuation processes, which can overwhelm startups with limited teams. Technically, this requires permissions for "managing an AIF" (including portfolio and risk management under Article 51ZC(2) RAO), and firms cannot operate as "letter-box entities" (Article 51ZC(3) RAO) or solely provide AIFM management functions without substance.
Exclusions apply for connected activities like dealing as agent or advising on investments (PERG 2.9.22), but misaligning these with your business model often leads to FCA pushback.
Timeline Crunch: With FCA targeting 6–9 months for AIFM approvals, delays from incomplete business plans (e.g., missing financial projections) are common—up to 40% of apps need resubmission. Get it wrong first time—say, by omitting evidence of equity injection (e.g., bank statements or SH01 Companies House filings)—and the FCA's statutory 12-month clock resets from the resubmission date, turning a 6-month process into over a year.
Cost Escalation: Expect £10,000+ in FCA fees alone for Category 6, plus £5,000–£20,000 for policies and SMF screenings. For full-scope UK AIFMs, you'll need to submit Form A for SMFs alongside a detailed regulatory business plan covering AIFMD reporting and delegation models.

For advisory firms layering AIF management, this means dual AIFMD/MiFID hurdles, amplifying the pain. Our roadmap details how to structure your application to hit the new proportional rules for mid-sized firms, saving time and money.

Challenge 2: SM&CR Reforms – Streamlined, But Still a Compliance Headache

The FCA's PS25/4 and CP25/21 introduce welcome tweaks to SM&CR, like extending criminal record checks (CRC) to 6 months (implementing in 2026) and reducing pre-approval SMFs for non-enhanced firms. But for AIFMs and investment managers, appointing at least two SMFs (e.g., SMF16 for Compliance Oversight, SMF17 for MLRO) remains non-negotiable, with fit-and-proper assessments now under tighter scrutiny.

Key Issues:

Talent Shortages: Finding "fit and proper" SMFs amid a competitive market is tough—especially with 2025's emphasis on L&D plans requiring 5–7 courses annually on topics like AML and Conduct Rules. Technically, this ties into permissions like "managing investments" or "advising on investments," where SMFs must oversee client money controls if applicable, and evidence gaps (e.g., no UK principal place of business details) can halt progress.
Query Overload: FCA queries on SMF competence can drag assessments to 12 months, with iterative rounds (1–4 typical) costing £250/hour extra if uncapped. Incomplete Form A submissions—lacking 3-year financial forecasts (using the FCA's Financial Analysis Template) or client money account details—reset the 6-month target to 12 months, as the FCA restarts its review clock.
Enhanced Thresholds: Firms crossing 30% higher thresholds (e.g., for headcount or revenue) face stricter rules, catching growing advisory firms off-guard. For MiFID top-ups, this includes proving exclusions don't apply to ancillary activities, per FUND 1.4.4(3)R for AIFMs.

Investment managers under MiFID will see overlaps with IFPR prudential requirements, adding layers to operational resilience testing. Fundsure's packages include SMF screenings (£400 for two) and tailored L&D plans, helping you avoid these pitfalls.

Challenge 3: MiFID Top-Ups and Research Payments – Balancing Innovation with Guardrails

For advisory firms and investment managers seeking MiFID top-up permissions (e.g., advisory under COBS 9 or arranging deals), PS25/4's green light on joint research/execution payments is a boon—allowing bundled services with clear guardrails. But client categorisation (professional-only to skip PRIIPs KIDs) and conflicts policies must be airtight.

Key Issues:

Complexity in Hybrid Models: AIFMs adding MiFID advisory face dual regimes, with FCA demanding evidence of suitability assessments and operational controls—leading to 20–30% more queries. Technically, permissions like "arranging (bringing about) deals in investments" or "managing investments" require alignment with your Investment Manager’s Agreement (IMA), and errors here (e.g., unaddressed client money safeguarding) extend timelines from 6 to 12 months.
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Research Budget Scrutiny: New rules require transparent allocation, but mid-sized firms struggle with documentation, risking fines or delays. For UK UCITS ManCos or full-scope AIFMs, this overlaps with MiFID top-ups like individual portfolio management (FUND 1.4.3R(3)–(6)), where incomplete financial forecasts or policy gaps trigger full re-reviews.
Cross-Border Snags: Post-Brexit, non-UK AIFs need reverse solicitation clarity, complicating applications for international managers. Missing bank account proofs or activity location details in wholesale markets apps can reset the clock to 12 months.

The roadmap maps out permission-specific checklists, ensuring your app aligns with 2025's growth-focused reforms.

Why 2025 Is Your Year to Act – And How Fundsure Can Help Avoid Errors and Delays

These challenges aren't insurmountable, but they demand proactive planning. With FCA's high-growth oversight team offering startup support and reforms like lighter-touch AIFMD reporting, authorised firms in 2025 will gain a competitive edge in attracting institutional capital. The trickiest part? Nailing it first time—FCA apps are unforgiving, with even minor omissions (e.g., no equity injection evidence or misaligned permissions) resetting the 6-month target to a full 12 months, per their statutory deadline.

We've seen firms lose months to resubmissions over something as simple as an incomplete Form A or overlooked client money policies. That's where Fundsure shines. Our fixed-fee packages (£6,500 Basic for AIF-only, £9,000 Standard, £12,000 Premium for MiFID top-ups) bundle everything: SMF screenings, policies, and FCA query support (up to 4 rounds, with a £1,250 cap on extras at £250/hour). We use the FCA's Financial Analysis Template for forecasts and ensure permissions match your IMA—slashing error risks and keeping you on the 6-month track. Post-approval, our retainers (£1,000–£3,000/month) include unlimited training (£120/person/year) to maintain compliance.

For bespoke advice, drop me a line at support@fundsure.co.uk or call 02078988522. Let's turn regulatory hurdles into launchpads.