CP26/16 has closed: what firms should prepare for next

At a Glance

CP26/16 closed on 9 July 2026. It proposed changes to the delegation of specified safekeeping functions for certain private-market assets and clarifications to the authorised fund registration function. It did not propose a new data return to the FCA.

CP26/16 addressed a specific obstacle for authorised AIFs holding private-market assets. It proposed allowing depositaries of authorised AIFs managed by full-scope AIFMs to delegate specified registration or custody functions for certain assets, with the permitted delegate and protections depending on the asset classification.

The paper also proposed clarifications to how COLL registration requirements, CASS 6 custody rules and AIFMD-derived provisions interact. Because the consultation closed on 9 July 2026, firms should map the operating-model issue now but wait for the FCA's final position before changing delegation arrangements.

Who should monitor the FCA's next step

The FCA says the proposals will be of most interest to depositaries and authorised fund managers of authorised AIFs that invest, or may invest, in directly held real estate and partnership vehicles. They may also affect depositaries of other authorised funds and unauthorised AIFs. That readership description is not a substitute for analysing the final rules when the FCA publishes its response.

MEMA recommends using the FCA's stated audience to document why the consultation is relevant to the firm's permissions, activities or service-provider relationships, without treating consultation readership as the final scope of rules that have not yet been made.

Map the function before changing the model

CP26/16 is not an FCA data-submission proposal. The ownership question is operational and legal: which entity performs the registration or safekeeping function for each relevant asset type, whether a proposed delegate is permitted, how legal title is held and what evidence the depositary retains to oversee the arrangement.

The low-regret task is an asset-by-asset ownership map: identify the registration or safekeeping function, current legal-title holder, proposed delegate, applicable rule set and depositary oversight evidence. The map should record the asset classification relied on, the source for that conclusion, differences between current and proposed arrangements, and any legal advice or service-provider dependency. Legal agreements or control ownership should change only after the final rules support the model. Scenario testing can then focus on exceptions, delegate failure, insolvency, legal-title integrity and access to evidence rather than a generic transformation programme. An accountable owner should record which questions need the FCA's final response, the named reviewers and evidence dates, and when the map will be revisited.

What CP26/16 proposed

Delegation of COLL Registration Function to AFM Affiliates

CP26/16 proposes that depositaries of authorised AIFs managed by full-scope AIFMs may delegate the COLL registration function for assets that are not safe custody investments or AIF custodial assets, such as real estate and partnership interests, exclusively to the AFM’s affiliates. This delegation allows the affiliate to hold legal title to these assets on behalf of the fund, subject to the proposed fund protections. MEMA recommends that firms assess their current registration processes and data ownership models to test clear accountability against any final delegation limits.

Clarification of Custody Delegation under CASS 6

The FCA proposed clarifying that depositaries could delegate custody functions for safe custody investments that are not AIF custodial assets to regulated third parties, aligning with existing provisions for AIF custodial assets. This change means depositaries no longer need to register these assets in their or their nominees’ names. MEMA recommends that firms review their custody arrangements and oversight controls to reflect this delegation flexibility while maintaining investor protection.

Alignment of COLL Registration Rules for Small and Full-Scope AIFMs

The consultation proposes aligning the COLL registration function rules for depositaries of authorised AIFs managed by small AIFMs with those for full-scope AIFMs. This harmonisation simplifies the regulatory framework and reduces ambiguity. Depositaries and AFMs in the relevant structures can map function ownership to prepare for consistent application of these rules across fund sizes.

Permanent Rule Change Replacing Modification by Consent

CP26/16 proposes replacing the temporary Modification by Consent for COLL 5.6.22R related to guarantees and indemnities with a permanent rule change. If finalised, this would replace the temporary modification with a Handbook rule regarding their responsibilities. Firms should wait for the FCA's final response before treating the proposed rule as settled.

Interaction of COLL, CASS 6, and AIFMD Provisions

The FCA sets out how COLL registration function rules, CASS 6 custody rules, and AIFMD/UCITS-derived provisions interact, particularly regarding asset registration and custody delegation. This clarification is intended to reduce conflicting interpretations and operational risks.

Low-regret work after the consultation

Board assurance over the proposed delegation chain

MEMA’s view is that boards should prioritise confirming that the firm has established clear ownership of each registration and safekeeping function, with documented delegation, oversight and exception processes. Given the increased complexity from delegation to affiliates or third parties, boards should seek assurance that operational risks are well understood and mitigated. This includes reviewing evidence from internal audits, compliance monitoring, and third-party oversight reports.

Boards should evaluate the firm’s preparedness to adapt its operating and legal frameworks to the delegation changes proposed in CP26/16. This involves scrutinising gap analyses and scenario testing outcomes to assess the robustness of delegation arrangements and their alignment with FCA expectations. Boards can also review legal opinions on the implications of registering assets in the name of AFM affiliates, particularly concerning potential liabilities and investor protections. Assurance evidence should include documented management responses to identified risks and a clear roadmap for implementation. By maintaining active oversight and engaging with senior management on these matters, boards can ensure that the firm’s governance remains effective and that the delegation of registration and custody functions does not compromise fund asset integrity.

Source Evidence

Plain English Glossary

• CASS - Client Assets sourcebook. FCA Handbook section governing how firms must hold, safeguard, and reconcile client money and assets.
• CP - Consultation Paper. FCA publication setting out proposed rule changes and inviting feedback from industry and the public.

Disclaimer

This article is for general information only and does not constitute legal or regulatory advice. Firms should assess the application of regulatory requirements by reference to their permissions, products, customers and operating model.

How MEMA Can Help

MEMA can help firms translate regulatory change into practical controls, policies, monitoring activity and board evidence. Book a free scoping call to discuss what this development means for your firm.

MEMA helps firms apply regulatory developments through its fund governance and compliance support.

Further reading: a related operating-model evidence guide.