PE firms ‘will have their say’ over FCA rules

 Private capital firms will not have to file the same template as retail managers, and will be consulted over its introduction.  

New fee and expenses reporting rules being introduced by the UK regulator may be less onerous than initially feared, sources suggest.

The Financial Conduct Authority said last week private equity managers would have to report fees and expenses to their investors using a standard template.

However, the FCA has clarified that private equity firms will not be expected to use the same reporting template as retail managers.

“The indications are that the FCA will incubate a discussion on the nature of the template. Private equity industry groups are expected to be involved in that working group and will want to get their message out. Firms with a particular issue may also have their say,” Chris Dearie, partner at MJ Hudson, told pfm.

The British Venture Capital Association, which will be involved with the working group, said the FCA also plans to work with stakeholders to consider how the template should be introduced.

“The FCA is proposing to ask an independent person to convene a group to develop this further and the timeline for this work is to be confirmed,” Gupreet Manku, policy head at the British Venture Capital Association, told pfm.

In terms of reporting frequency, the regulator does not expect firms to report or at a set interval. It will require firms to send completed templates to investors in line with their limited partnership agreements.

“As this relates to reporting to investors, it depends on the frequency of reporting investors have agreed with managers. Typically this is quarterly,” Gurpreet Manku, director of policy at the BVCA, told pfm.

Concerns about the use of a template for reporting to investors, no matter how industry-driven it is, remain. Citing the limited uptake of the optional Institutional Limited Partners Association fee reporting template that was published in the US in 2016 as an example, Dearie said there are clear differences in investor and fund manager requirements.

“Investors might want to know something managers don’t want to report. There has been limited success with the ILPA template in the US, investors would like to see it used but managers are more reluctant,” Dearie said.