How UK regulatory revamp affects PE

The impact will be limited, but private equity houses will need to make adjustments as the UK government refashions its financial services regulatory regime.

The UK private equity industry can breathe a collective sigh of relief – little will change for buyout houses as the UK updates its regulatory framework, according to one London-based lawyer.

The government is set to split the Financial Services Authority into two separate entities: the Prudential Regulatory Authority (PRA), which will supervise major financial players, and the Financial Conduct Authority (FCA), which will handle market conduct and firms not deemed a systemic threat to the economy.

The FCA will therefore be responsible for overseeing most investment managers, according to a Kaye Scholer client memo. Even so, the change is largely nominal, the memo said: “Instead of dealing with a single regulator, the FSA, they will from day-to-day be dealing with a single regulator, the FCA”.

However, the FCA may be able to inflict reputational damage on firms. The agency will have the power to make public when a firm is the subject of disciplinary action, even if it is later proved the firm was not involved in any wrongdoing.

Overall a more holistic approach to compliance should be taken by private equity houses as UK regulators shift from a prescriptive approach to one based more on principles and outcomes, said a separate Kaye Scholer memo. Regulators are slimming down their rule books, in effect leaving firms with less guidance as to how they should meet their obligations.

The government published a blueprint for its reform efforts this week. Comments on the proposals will be accepted until 8 September.