Florman: Over-regulation is our fault

BVCA chief executive Mark Florman said the private equity industry had no one to blame but itself for onerous regulations, adding changes were needed to ensure favourable oversight in the future.

Referring to the more arduous regulations headed GPs' way in coming years, British Private Equity and Venture Capital Association (BVCA) chief executive Mark Florman said he did not “blame the regulators at all, this is our own fault”.

Addressing delegates at the BVCA’s annual summit in London this Thursday, Florman added greater transparency and engagement with the public was needed to ensure private equity markets were better understood by policy makers determined to supervise the asset class.

About 60 percent of our staff is there just to keep the regulators happy

Edmund Truell

“Our industry is naturally private, so it can be challenging to open up more,” but failing to do so could result in ill-fitting rules that do not necessarily make sense for private equity, he said.

Florman’s colleague Joe Steer, the BVCA’s head of international public affairs, laid down the specifics, citing the pan-EU Alternative Investment Fund Managers Directive as the trade body’s biggest challenge. “We’ve been able to convince the EU [that] leverage held at the portfolio company level should not be considered leverage at the fund level.” However the concession is not yet set in stone as the Directive undergoes final negotiations, he added.

Mark Florman

Another battle will relate to the level of influence a fund’s depositary will hold over a GP’s investment decisions. The BVCA is lobbying against depositaries – which are responsible for keeping GPs in line with a fund’s governing documents – having in effect a pre-transaction clearance process fund managers might need to follow.

Also speaking at the summit was Edmund Truell, the founder of (re)insurance company Pension Corporation, who warned attendees not to “underestimate the stupidity of regulators”.

“About 60 percent of our staff is there just to keep the regulators happy,” said Truell.

For more coverage of the BVCA summit , click here and here.