Fund and asset management rules

Hold the managing investments permission

Discretionary portfolio management is a regulated activity — you need the managing investments permission before running client portfolios.

FCA Part 4A permission for managing investments under FSMA 2000

The regulated activity of managing investments (including AIFs and UCITS) under the Financial Services and Markets Act 2000 (c.8), the requirement for FCA Part 4A permission, threshold conditions, the UK AIFM regime and depositary appointment, and the general prohibition in section 19 — operating without permission is an offence under section 23 and agreements may be unenforceable under sections 26 to 28.

Managing investments is a regulated activity under the Financial Services and Markets Act 2000 (FSMA) and the Regulated Activities Order. A firm that manages investments belonging to another person, in circumstances involving the exercise of discretion, must hold a Part 4A permission granted by the Financial Conduct Authority (FCA), unless it is exempt. This includes managing portfolios and, under the related regimes, managing alternative investment funds (AIFs) and UCITS schemes.

Primary statutory source: Financial Services and Markets Act 2000 (c.8), with the Regulated Activities Order 2001
Regulator and permission: FCA Part 4A permission (PRA also involved for dual-regulated firms)
Regulated activity: Managing investments (discretionary management of another person's investments); related activities for managing AIFs and UCITS
General prohibition: FSMA s.19 — no person may carry on a regulated activity in the UK by way of business unless authorised or exempt
Threshold conditions: An applicant for Part 4A permission must satisfy, and continue to satisfy, the threshold conditions (for example adequate resources, suitability and effective supervision)
UK AIFM regime: Managers of alternative investment funds are subject to the UK AIFM regime; depending on assets under management a manager is either fully authorised or operates under the small AIFM registration regime
Depositary appointment: An authorised AIF generally requires a depositary to be appointed for safekeeping of assets and oversight duties
Offence: Carrying on the regulated activity without permission is a criminal offence under FSMA s.23
Civil consequence: Agreements made in breach of the general prohibition may be unenforceable against the customer (FSMA ss.26 to 28)

Permission and threshold conditions: To obtain a Part 4A permission to manage investments, a firm must apply to the FCA and demonstrate that it meets the threshold conditions and the FCA's rules. Permission is granted for specified regulated activities in relation to specified investments; a firm must operate within the scope of its permission (FSMA s.20).

AIFM regime and depositaries: A manager of one or more alternative investment funds is an alternative investment fund manager (AIFM) and is subject to the UK AIFM regime. Larger managers are fully authorised AIFMs; smaller managers below the regime's thresholds may use the small AIFM regime. A depositary must generally be appointed for an authorised fund to provide independent safekeeping of the fund's assets and oversight of the manager.

General prohibition and consequences: Under section 19 of FSMA, managing investments by way of business without authorisation or exemption breaches the general prohibition. This is a criminal offence under section 23. In addition, under sections 26 to 28 an agreement made by a person carrying on the regulated activity in contravention of the general prohibition is unenforceable against the other party, who may recover money or property and compensation, although the court has a discretion to allow enforcement where it is just and equitable.

Run funds under the UCITS or UK AIFM regime

Managing a retail UCITS fund and managing an alternative investment fund are distinct regimes: UCITS management carries the retail fund rulebook, while UK AIFMs follow the AIFMD-derived regime — reporting, and for full-scope managers the appointment of a depositary to safeguard fund assets and the AIFM remuneration rules (sub-threshold AIFMs operate under a lighter registration regime; the remuneration rules differ from the investment-firm code — see investment firm and trading venue rules for that regime).

AIFM, UCITS and depositary fund management

Fund managers operate under two UK regimes. A UCITS management company needs FCA authorisation to manage authorised retail funds under the assimilated UCITS framework within the Financial Services and Markets Act 2000; an alternative investment fund manager operates under the UK AIFM regime (full-scope or sub-threshold). Each authorised UCITS and AIF must appoint an independent depositary for asset safekeeping and oversight. The FCA authorises and supervises.

Regulator: Financial Conduct Authority (FCA)
Requirement: UCITS / AIFM authorisation; depositary appointment

Disclose climate-related risk

Larger asset managers must publish climate-related financial disclosures aligned to the TCFD framework — an entity-level report and product-level disclosures.

Climate-related financial disclosures (TCFD-aligned)

FCA-regulated asset managers, life insurers and FCA-regulated pension providers above scope must publish climate-related financial disclosures aligned with the Task Force on Climate-related Financial Disclosures (TCFD), under the FCA's ESG sourcebook made within the Financial Services and Markets Act 2000 framework — an entity-level report on governance, strategy, risk management and metrics, and product- or portfolio-level disclosures. The FCA supervises.

Regulator: Financial Conduct Authority (FCA)
Requirement: TCFD-aligned entity + product climate disclosures (ESG sourcebook)

Next steps

Make sure the shared duties in run a regulated financial services firm are in place, then confirm everything with the financial intermediary compliance checklist.

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Hold the managing investments permission

Run funds under the UCITS or UK AIFM regime

Disclose climate-related risk

Next steps

Related guides in Financial Regulation Overview

Hold the managing investments permission

Run funds under the UCITS or UK AIFM regime

Disclose climate-related risk

Next steps