Delighted that 14th July 2026, the Financial Conduct Authority Consultation Paper 26/28 has stated:
External Valuers
4.29 Under the existing regulations, managers of AIFs may choose to appoint an outside firm to value the investments in a fund and calculate its net asset value (NAV). The legislation refers to these firms as ‘external valuers.’ Having an independent third-party valuer with professional expertise can benefit fund investors. The legislation places unlimited liability onto an external valuer for any losses caused by the valuer being negligent or intentionally failing to perform its tasks.
4.30 In our consultation in April 2025, we proposed reviewing the unlimited liability provisions. Respondents were near unanimous that the risk to firms from having unlimited liability has prevented the market for external valuers from developing. They argued that the legislative provision should be removed. So, the Government proposes to remove this requirement from legislation. In its consultation, the FCA provides further details on its proposed rules around valuation and the use of third-party valuers.
Very grateful for support from industry stakeholders with this campaign.
Melville leads the industry campaign:
– The Alternative Investment Fund Managers Regulations 2013, Regulation 24(5) must be reformed.
– As a result of the unlimited indemnity for external valuers (arising from Regulation 24(5)), external valuers are understandably reluctant, for risk management purposes and often at the request of their insurers, to take on the external valuer role under 2013 Regulations.
– AIF investors are therefore having to rely on the Alternative Investment Fund Manager’s internal valuation, and do not benefit from independent determination of asset value by an external valuer. This runs counter to long-established principles of investor protection and good corporate governance.
Melville is delighted that HM Treasury is consulting on the reform of Regulation 24(5): https://www.gov.uk/government/consultations/alternative-investment-fund-managers-regulations-consultation. The consultation response date is 9th June 2025.
See attached Melville’s draft response to question 15 in the consultation document. Respondents are urged to consider utilising the draft response.
Melville has co-ordinated with industry stakeholders and had a constructive engagement with officials at the Financial Conduct Authority and HM Treasury on this matter, and forwarded to the officials this submission dated 18th December 2023
The Problem
Regulation 24(5) overrides any contractual limit on liability agreed between the Alternative Investment Fund Manager (AIFM) and the valuer. This simply does not work in practice.
At present few, if any, professional valuers can or will accept appointment as external valuers by an AIFM because of the unlimited liability imposed by Regulation 24(5).
Most reputable valuers in the UK are members of professional bodies that require them to have professional indemnity insurance. Moreover, some insurers will also have policy conditions that require all instructions to contain liability caps.
Fix the Problem
Melville, and other stakeholders, propose an amendment to Regulation 24(5) along the lines of (with in bold font amended wording):
(5) (a) Where the AIFM of an AIF and the external valuer agree to limit liability of the external valuer for losses suffered by the AIFM as a result of the external valuer’s negligence in performing its tasks (provided the limit of liability agreed is reasonable and proportionate to value of the AIF assets), the external valuer shall only be liable to that limit; and
(b) Subject to Regulation 24(5)(a) and irrespective of any other contractual arrangements, an external valuer is liable to the AIFM of an AIF in respect of which the external valuer is appointed for any losses suffered by the AIFM as a result of the external valuer’s negligence or intentional failure to perform its tasks.
Articles:
15/07/26 IPE Real Assets: News: UK rule change could see return of external valuers to real estate funds
9/06/25 IPE Real Assets: News: Real estate industry unites behind removal of unlimited valuer liability in UK AIFMD consultation
9/06/25 Property Week: Finance: FCA and Treasury to reform overlapping London listed real estate fund rules
19/01/24 IPE Real Assets: Guest View: Solving real estate’s fund valuer problem
18/12/23 RICS: Protecting the position of valuers under AIFMD
28/05/21 IPE Real Assets: Analysis: Why the UK’s external valuer liability problem for real estate must be solved
“Thanks for your considerable efforts in promoting these proposed amendments. After being rebuffed by the European Banking Authority in 2012 when, on behalf of the IVSC membership, trying to persuade them against the unlimited liability clause in the then emerging directive and thereafter seeing them kick the can down the road following the post implementation review a few years ago I am delighted that you seem to have succeeded in persuading the Treasury of the opportunity this now presents for the UK to have a transparent and independent valuation regime for AIFs”. June 2025
– Leading International Valuation Consultant