Private equity firms may be subject to senior management conduct rules from next year, if the Financial Conduct Authority’s plan to extend a code of conduct are extended to all FCA-supervised firms, including private equity.
The Senior Managers & Certification Regime is a code of conduct for senior managers of financial services firms. It aims to strengthen investor protection and market integrity, by “making individuals more accountable for their conduct and competence”, said the FCA in a press release.
Under the regime, senior managers would have to be certified for their “fitness, skill and propriety” for their positions annually.
In a note to its members, the British Private Equity and Venture Capital Association has said the plans need to be proportionate.
“The FCA has said it is committed to ensuring the regime is proportionate according to the size of the firm and the BVCA has been in discussions with the FCA on the application of the regime to the industry,” the note said.
Alternative investment managers should engage with the regulator’s consultation, as the proposals would place heavy obligations on them, according to a lawyer.
“Implementing the SMCR’s complex rules and ensuring ongoing compliance will place a significant burden on firms across management, the front office and the legal, HR and compliance departments,” said Simon Witney, special counsel at Debevoise.
“Although final rules will not be published until the summer of 2018, the difficulties experienced by banks in implementing the SMCR over the last few years makes it vital that asset managers, private equity firms, hedge funds and other firms start preparing as soon as possible,” he added.
The consultation closes on November 3, 2017.