In DWF's Wealth Management Annual Review 2025 (Wealth Management Annual Review of 2025 | DWF), we explored the FCA's continued focus on remuneration as a key driver of culture, conduct and consumer outcomes. In July 2026 the FCA has proposed a significant overhaul of the remuneration framework for solo-regulated firms since the advent of the Investment Firms Prudential Regime (“IFPR”). Through Consultation Paper CP26/27 (CP26/27: Remuneration: Solo-regulated firms’ rules reform), the FCA is seeking to replace the existing remuneration codes with a single, simpler and more proportionate regime.
Covering MIFIDPRU investment firms (SYSC 19G), alternative investment fund managers (“AIFM”, SYSC 19B) and UCITS management companies (“UCITS”, SYSC 19E), the proposals represent a clear shift away from detailed, prescriptive requirements towards an outcomes-based framework centred on governance, accountability and risk-adjusted decision making, anticipated to come into effect in Q1 2027.
Direction of travel: simplification rather than deregulation
The FCA's message is not that remuneration no longer matters. Rather, it considers that the current rules have become overly-complex, duplicative and, in some cases, more burdensome than equivalent requirements applying to banks. Viewed through that lens, CP26/27 is best seen as a material simplification and selective loosening of remuneration requirements, particularly for investment firms which currently fall within SYSC 19G. Mandatory structural requirements are being reduced, but firms will remain responsible for demonstrating that remuneration arrangements support prudent risk management, good customer outcomes and sound governance.
The practical implication is that firms are likely to gain greater flexibility in designing remuneration structures, but can expect the FCA to place greater reliance on qualitative judgement and oversight when assessing whether those arrangements remain appropriate.
What is changing?
As a starter, this is a move towards a single combined remuneration code for MIFIDPRU investment, AIFM and UCITs firms, replacing SYSC 19G, SYSC 19B and SYSC 19E with SYSC 19AA. This is to simplify compliance for firms / groups operating across multiple regulatory permissions and reduce the need to navigate overlapping remuneration requirements.
A notable proposal for the wealth management sector is the removal of remuneration code requirements for Small and Non-Interconnected (“SNI”) MIFIDPRU firms, currently covered under baseline requirements within SYSC 19G. As such, SNI firms would no longer be subject to the dedicated remuneration code, with the FCA instead relying on broader governance, conduct and risk management requirements to ensure remuneration arrangements remain appropriate. For many smaller wealth managers, this would represent a substantial reduction in regulatory burden and reflects the FCA's view that such firms generally pose lower prudential and systemic risks.
A revised approach to Material Risk Takers
The FCA is proposing a narrower and more proportionate approach to Material Risk Takers (“MRTs”). While firms will still need to identify individuals capable of materially influencing the firm's risk profile, i.e. those that can materially impact the firm’s conduct, investor interests or compliance with regulatory obligations, the population captured is expected to be smaller and more focused on genuinely risk-relevant roles. This should reduce the number of staff subject to enhanced remuneration requirements in many non-SNI MIFIDPRU firms.
Relaxation of deferral requirements
One of the most practically important changes is the proposed easing of mandatory deferral rules. Currently SYSC 19G requires substantial portions of variable remuneration for MRTs to be deferred over prescribed periods. Under CP26/27, the FCA proposes a more flexible framework with significantly reduced prescription around deferral structures. Firms would retain discretion to determine whether and how deferral should be used, provided remuneration arrangements support effective risk management and appropriate conduct outcomes. Similarly, malus and clawback remain available to firms as a performance adjustment mechanism, but are not mandatory requirements. For many firms, particularly owner-managed wealth managers and consolidators, this could provide considerably greater flexibility when designing incentive plans and retention arrangements.
Variable remuneration rules become less prescriptive
The proposals would also remove a number of detailed requirements currently applicable to variable remuneration, including aspects of pay-out process design that were largely inherited from EU-era remuneration frameworks. The FCA appears increasingly comfortable allowing firms to determine the appropriate balance between fixed and variable remuneration provided that: conflicts of interest are managed; remuneration does not encourage excessive risk taking; consumer outcomes are considered; and governance arrangements remain robust. This may be particularly relevant for firms considering long-term incentive plans, management equity arrangements or private equity-backed growth strategies.
Reduced reporting and disclosure obligations
The FCA is also proposing to remove a number of remuneration reporting and disclosure requirements, including the MIF008 returns, reflecting its wider objective of reducing regulatory burden. Firms may see a reduction in: annual remuneration disclosure obligations; remuneration-related regulatory reporting; and supporting documentation requirements associated with the current framework. Firms should welcome this reduction in the operational burden.
Remuneration committees
The FCA also proposes removing mandatory remuneration committee requirements
for firms currently subject to them. Instead, responsibility would sit more squarely with the governing body, which would remain accountable for ensuring remuneration arrangements are effective and aligned with the firm's risk management framework.
What should firms be doing now?
Although the consultation remains open and final rules are not expected until Q1 2027, firms should not wait until implementation to begin assessing the impact. In particular, boards and remuneration decision-makers should consider taking the following steps:
- Reviewing existing remuneration frameworks / arrangements: identify which aspects of current remuneration arrangements have been driven primarily by SYSC 19 requirements and which continue to make commercial and risk management sense independently of regulatory obligation.
- Reassess MRT populations: firms should consider how a narrower MRT definition may affect future governance, remuneration oversight and remuneration policy documentation.
- Evaluating incentive plan opportunities: the proposed reforms may create additional flexibility around: deferred bonus structures; carried interest and long-term incentive arrangements; management equity plans; and retention incentives following acquisitions or private equity investment.
- Maintaining governance discipline: while the detailed rules may reduce, firms should resist the temptation to view remuneration as a lower regulatory priority. The FCA remains clear that remuneration should support healthy culture, prudent risk-taking and good client outcomes. Boards should be able to evidence the rationale behind remuneration decisions.
- Consider responding to the consultation: many wealth management firms now have a genuine opportunity to influence the future regime. Firms with concerns around MRT identification, deferral provisions, disclosure requirements or group application should consider whether to engage directly or through industry bodies before the consultation closes on 16 September 2026.
Looking ahead
For MIFIDPRU investment firms, CP26/27 represents a notable change in regulatory philosophy. The FCA is signalling a move away from detailed rule-driven remuneration regulation towards a framework based on governance, accountability and proportionality. If implemented broadly as proposed, many non-SNI investment firms will benefit from reduced compliance burdens, greater flexibility over variable remuneration design and lighter reporting requirements. However, boards should not mistake simplification for deregulation. The FCA's expectations regarding culture, conduct and prudent risk management remain firmly intact, and firms will need to demonstrate that their remuneration arrangements continue to deliver those outcomes.
