Ryan FowlerNew research has revealed that over a third (34%) of private market professionals admit to taking a last-minute approach to planning for new regulations, struggling with the volume, speed, and complexity of regulatory changes. This is according to a global study conducted among 400 C-suite executives and senior professionals in private markets, commissioned by CSC.
The lack of regulatory preparation is most acute in North America, where 42% of respondents said they leave regulation planning until just before implementation. In contrast, Asia-Pacific is the most prepared region, with 66% of local respondents proactively identifying and planning for new regulatory changes well ahead of deadlines.
The study, conducted by CSC, a leading provider of global business administration and compliance solutions, surveyed investment professionals in private equity, private debt, real estate, and infrastructure sectors across Europe, the U.S., and Asia-Pacific. The findings highlight the challenges private market professionals face in managing special purpose vehicles (SPVs) amidst regulatory changes.
More than two-thirds (69%) of senior professionals in private markets reported that responding to regulatory changes in the context of managing SPVs has become a significant challenge. Thijs van Ingen, global market leader of corporate and legal solutions at CSC, stated, “Regulations continue to develop around the world and remain both a head- and tailwind for many managers, particularly as they become more and more complex. Our clients work across many different jurisdictions, which all have vastly different regulations that apply to SPVs and investments, and this can cause major risks.”
Specific regulatory frameworks such as DAC6, FATCA, and CRS have been particularly challenging, with 65% and 64% of professionals stating difficulties in addressing these regulations for SPV administration. Ultimate Beneficial Ownership (UBO) registration and filings also pose challenges for 58% of respondents. Delphine Jones, managing director of client solutions at CSC, commented, “Dealing with regulation can be challenging, and the world is rapidly changing. For example, UBO registers is a new element to consider in Europe and other jurisdictions, such as the U.S. There are notable differences across markets, such a variety of changing filing deadlines, which adds to the difficulty of adhering to these regulations.”
Finding qualified staff with a strong understanding of global regulations also continues to be an operational risk, with 71% of those surveyed stating that access to qualified staff has become a significant challenge in setting up and running SPVs. Van Ingen noted, “Finding suitable staff, for example, those in legal and compliance, is getting much tougher due to the market being incredibly competitive. As deals become more complex—taking place across borders and therefore entering different regulatory environments—it’s crucial to have experts with the right knowledge that can support your team.”
Jones added, “In a world of sophisticated regulation, outsourcing the management and administration of SPVs to specialists can mean sponsors stay current with all regulatory developments and reporting requirements across jurisdictions. This radically simplifies one of the most significant and risky elements of using SPVs.”
