UK’s SMRC to boost hiring in PE firms

Private equity firms may have to increase their headcount to comply with regulation that introduces individual accountability next year, according to one general counsel.

The Senior Managers and Certification Regime will split the financial and compliance functions, meaning an increased headcount will be needed, the placement agent’s lawyer, speaking on the sidelines of the ALFI PERE conference in Luxembourg, said.

“The Senior Managers and Certification Regime will put lots more focus on senior manager roles, and the need to delineate those roles. With the greater liability, current processes will need to bear scrutiny, and that may lead to new roles being created,” the GC said.
Elsewhere in the regulation space, the upcoming challenges for private equity firms and service providers are relatively unchanged, they said.

Top of the agenda for firms and service providers should be the fallout from Brexit, the Markets in Financial Instruments Directive II, and to a lesser extent the General Data Protection Review, they added.

MiFID II is applied differently from country to country, with each interpreting marketing rules in different ways.

“UK private equity firms are in odd position, as the Financial Conduct Authority has made clear that private placement funds are not in MiFID II scope,” said the counsel. “However, if they were to market in Germany, they would need the MiFID passport there.”

“Brexit has accelerated the fundraising timetable,” the counsel commented. “GPs who were previously not planning to be in market, are looking to be in and out of market with a new fund before March 2019,” the GC added.

In addition, fund terms are more likely to feature redomiciling clauses, and provisions allowing LPs to come out of a vehicle if it is no longer in the EU, they said.