AIFMD II took effect across EU member states on 16 April 2026. For UK litigation funders, the immediate operational impact is limited. But the regulatory divergence between the EU and UK now matters more than the directive itself.
**Update — 15 July 2026:** On 14 July, the FCA published formal consultations on the proposed UK AIFM regime and FRAME fund-reporting framework. This update adds the proposed 2028 timetable, the separate FRAME reporting proposals and links to both consultations. The article's original analysis of UK–EU regulatory divergence remains unchanged.
What AIFMD II Actually Changes for EU Managers
The directive introduces several substantive requirements for alternative investment fund managers operating within the EU.
Open-ended AIFs must now select at least two liquidity management tools from a harmonised list. Enhanced delegation rules require managers to demonstrate a clear rationale for any outsourced arrangements. And loan-originating funds face a specific new framework designed to limit systemic risk.
Reporting changes under the new Annex IV template do not apply until April 2027. But the governance and delegation requirements are live now.
For EU-domiciled litigation funders — or UK managers with EU-licensed entities — AIFMD II creates an immediate compliance layer.
Why the UK Is Not Following
The UK government and FCA have been explicit. Neither proposes to track the EU AIFMD II amendments. For the first time since AIFMD was introduced, the UK and EU are taking substantially divergent approaches to regulating alternative investment fund managers.
The direction in the UK is the opposite of Brussels. HM Treasury and the FCA are consulting on simplification — a more graduated, proportionate framework that reduces the regulatory burden on fund managers rather than adding to it.
This is not a delay. It is a deliberate policy choice rooted in post-Brexit autonomy and economic competitiveness.
The FCA's Separate Direction
On 14 July 2026, the FCA published its formal consultation on a replacement UK AIFM regime. The proposals retain a proportionate approach based on fund-manager size and activity, with implementation currently envisaged for 2028. The rules are not final and remain subject to consultation.
The FCA also published a separate consultation on Fund Reporting for Asset Management Entities (FRAME). FRAME would replace several existing fund-reporting returns with consolidated forms and is likewise intended to be fully implemented in 2028.
For UK litigation funders, the near-term regulatory question is therefore not how to implement AIFMD II. It is whether a fund or manager falls within the applicable UK requirements, how the proposed regime and FRAME may affect its reporting, and what operational evidence it will need if those requirements apply.
The Cross-Jurisdiction Complication
The divergence creates one specific problem for managers operating across both markets. Many investment management groups have licensed entities in both UK and EU jurisdictions.
Where there is delegation from an EU AIFM to a UK portfolio manager — or vice versa — the firm now faces two substantively different regulatory frameworks. That increases compliance cost and operational complexity.
For litigation funders considering European expansion or managing EU investor relationships, the structural question is whether to maintain separate governance tracks for each jurisdiction or build an infrastructure layer that can accommodate both without redundancy.
What This Means for UK Funder Operations
The practical implication for UK litigation funders is not immediate regulatory pressure. It is strategic clarity.
AIFMD II is not coming to the UK. The FCA is building something different, and the details are not yet final. That window — between EU implementation and UK framework finalisation — is the period to establish operational practices that can support investor expectations and the reporting requirements ultimately adopted by the FCA.
Both regimes, however different in design, are asking the same question: can you demonstrate that your fund is managed with appropriate oversight, reporting discipline, and evidence of decision-making?
For litigation funders, that means structured mandate compliance monitoring, diligence-ready reporting, and audit trails that hold up to scrutiny from investors, secondary buyers, and regulators in any jurisdiction.
That is what Lexivoa Mandate is built to support — portfolio oversight infrastructure that produces the evidence layer regulators and investors ask for, regardless of which framework applies.
The Question for UK Funders Now
The EU has acted. The UK is building something different. The question for UK litigation funders is not which framework to follow.
It is whether the operational infrastructure you are building today will be sufficient as the proposed UK regime develops — and whether your investors, auditors, and secondary market counterparties are already asking for the same underlying evidence.
Sources: Directive (EU) 2024/927 — AIFMD II, EUR-Lex, FCA CP26/28: The UK AIFM Regime, FCA CP26/26: Fund Reporting for Asset Management Entities, HM Treasury: Investment Management Strategy II
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