Market abuse and conflicts of interest continue to be the most significant risks involved with private equity, says the FSA.
In the FSA’s feedback to its recent Private Equity discussion paper, the regulator says these two issues will remain the key areas of regulatory focus and its alternative investments supervision team will be conducting further work in relation to conflicts of interest within private equity firms.
The FSA says it will start conducting a bi-annual survey on banks’ exposure to leveraged buyouts and enhance regulatory reporting requirements for private equity firms to improve standards.
The FSA also says it will be engaging in a targeted fact-finding exercise to understand the issues and risks inherent in dealing with financial distress and default in a heavily traded corporate name.
FSA managing director of wholesale business Hector Sants says: “The feedback we have received to the November paper has confirmed that the current approach to supervising this market is broadly appropriate.
However we remain committed to working with firms to ensure that our supervisory capability continues to remain highly focused on the key regulatory issues. When considering this document it is important to understand that we have restricted ourselves to addressing those issues which fall within the FSA’s remit.”