The Financial Conduct Authority’s (FCAs) updated regulatory capital rules for investment firms came into force on 1 April, marking the latest step in the evolution of the UK’s post-MiFID prudential regime. Rob Leedham, CEO of Yealand Fund Services, has written on what this means in practice from a fund governance perspective.
The changes are designed to simplify elements of the MIFIDPRU framework, particularly around how regulatory capital is defined and treated.
Importantly, they do not materially alter the overall level of capital firms are required to hold. On paper, this is a refinement rather than a reset.
However, now the rules have bedded in, a clearer picture is emerging. Rather than being treated as a technical adjustment, firms are using this as a prompt to take a more fundamental look at how they structure, govern, and scale their businesses.
Simpler capital rules but still a strategic decision for firms
The FCA’s updates were designed to simplify the definition and treatment of regulatory capital. That objective has largely been achieved.
However, a simpler framework does not remove complexity from the underlying business.
Firms are finding that they still need to reassess how capital requirements evolve alongside growth and operational complexity.
The conversation has shifted away from calculation and towards judgement.
In practice, this means revisiting whether capital planning assumptions remain appropriate, whether operational structures are still efficient, and whether governance frameworks are keeping pace with expansion.
It also means taking a harder look at how risk exposure develops as firms grow, and whether wind-down planning remains credible.
The result is that the changes are less about recalculating capital, and more about ensuring the operating model remains appropriate as businesses scale.
What the reforms mean in practice for investment firms
For wealth managers and investment firms operating under MiFID permissions, the fundamentals remain unchanged.
Capital requirements continue to scale with assets under management, client money and custody exposure, operational complexity, and overall business growth.
What has changed is the level of scrutiny firms are applying to these dynamics. As businesses expand model portfolio services or broaden distribution, this brings additional layers of governance and operational risk that cannot be ignored.
The updated rules have therefore created a natural pause point. Firms are using this moment to reassess whether their current structures are still optimal, particularly where growth has been rapid or where business models have evolved over time.
Why governance and reporting still matter
If there was any expectation that simplification would reduce regulatory pressure, that has not materialised.
Firms are still required to demonstrate strong financial resources, robust governance arrangements, and clear oversight responsibilities.
Operational resilience and credible wind-down planning remain firmly in focus. In many cases, the simplified framework is placing greater emphasis on how well firms can evidence these fundamentals, rather than how they calculate them.
Boards, finance teams, and compliance functions are therefore taking a closer look at whether capital forecasts remain appropriate, how operational risk is changing as the business evolves, and whether oversight responsibilities are clearly defined across both manufacturing and distribution.
As product ranges expand, reporting complexity also increases, making it more challenging to maintain consistent and transparent governance.
Where unitisation may enter the conversation
While the capital rule changes do not require firms to alter their structures, they are prompting a broader strategic review.
For firms operating model portfolios in particular, there is a growing question around whether existing structures remain the most efficient as they scale.
For some, this is leading to consideration of whether unitising model portfolios into authorised fund structures could offer a more robust framework.
The appeal lies in the potential for clearer governance, more defined oversight and reduced operational complexity, alongside more efficient distribution and a clearer separation between manufacturing and distribution responsibilities.
As model portfolio businesses continue to grow, this type of structural review is becoming increasingly common, even if it is not universally adopted.
What firms should be reviewing now
With the new framework now in place, firms are using this as an opportunity to step back and test their assumptions.
The key question is not whether they comply with the rules, but whether their current model is built to support future growth.
This includes considering whether their structure is genuinely scalable, how capital requirements will evolve as the business expands, and whether unnecessary operational complexity has built up over time.
It also means asking whether an alternative structure could simplify governance and whether the current model supports long-term distribution ambitions.
Framed properly, this is not about reacting to regulatory change. It is about making sure the business is structured for where it is heading.
Role of an independent ACD
Where firms do decide to evolve their structure, the process is rarely straightforward. It involves regulatory approvals, operational changes, governance design and careful communication with investors and platforms.
An independent Authorised Corporate Director can play an important role in supporting that transition.
The value is not just in implementation, but in providing independent oversight and helping firms establish governance frameworks that are robust and scalable.
From a reputational perspective, that independence carries weight. It provides an additional layer of assurance around oversight and accountability, which is increasingly important in a more scrutinised environment.
A timely moment to reassess
The FCA’s updated capital rules may simplify aspects of the prudential framework, but they also reinforce a broader message.
Growth, governance, and resilience are increasingly interconnected.
For wealth managers operating model portfolios this is a timely opportunity to step back and assess whether their current approach remains fit for purpose.
For some, that may include considering whether more structured, unitised approaches could better support scalability and oversight.
Ultimately, the firms that treat this as a strategic moment – rather than a compliance exercise – will be better placed to grow with confidence while maintaining strong governance and delivering consistent outcomes for investors.
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