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.