• While 60% proactively plan for regulatory changes as early as possible, 34% leave the planning to just before implementation
• According to a study by CSC, 69% said responding to regulatory changes in the context of managing SPVs had become a challenge for them
• 71% said access to suitably qualified staff has become a significant challenge in terms of setting up and running SPVs
New research has found that over a third (34%) of private market professionals admit to taking a last-minute approach to planning for new regulations as many struggle to cope with the volume, speed, and complexity of regulatory changes. This is according to a new global study conducted among 400 C-suite level executives and senior professionals working in private markets commissioned by CSC.
A lack of regulatory preparation is most acute in North America, where 42% of respondents said they leave regulation planning until just before they come into effect. Asia-Pacific was the most prepared region, with two-thirds (66%) of local respondents stating they proactively identify new regulatory changes early on and plan for implementation well ahead of the deadline.
The study by CSC1, the world’s leading provider of global business administration and compliance solutions, was conducted among investment professionals in private equity, private debt, real estate, and infrastructure sectors in Europe, the U.S., and Asia Pacific. The findings are detailed in a new report focused on the fundamental role that special purpose vehicles (SPVs) play in optimizing private market investments.
Overall, more than two-thirds (69%) of senior professionals working in private markets said responding to regulatory changes in the context of managing SPVs had become a challenge for them.
“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,” says Thijs van Ingen, global market leader of Corporate and Legal Solutions at CSC. “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.
“The compliance, governance, and risk responsibility remain with the fund manager, and there are multiple levels of regulation being put onto these structures—from the fund level to the SPV level to the actual investment itself.”
In terms of specific rules and frameworks, DAC6, FATCA, and CRS have been the most difficult—with almost two-thirds (65% and 64%, respectively) of private markets professionals stating that it’s been challenging to address the impact of these on the administration of SPVs. This was closely followed by Ultimate Beneficial Ownership (UBO) registration and filings at 58%.
“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,” says Delphine Jones, managing director of Client Solutions at CSC.
Finding qualified staff with a strong understanding of global regulation also continues to pose an operational risk to managers. Almost three-quarters (71%) of those surveyed stated that access to qualified staff has become a significant challenge in terms of setting up and running SPVs.
“Finding suitable staff, for example, those in legal and compliance, is getting much tougher due to the market being incredibly competitive,” says van Ingen. “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.”
“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,” adds Jones. “This radically simplifies one of the most significant and risky elements of using SPVs.”
1CSC, in partnership with Pure Profile, surveyed 400 C-suite level executives and similarly senior professionals working in private equity, private debt, real estate, and infrastructure between Dec 2023 and Jan 2024. Respondents were equally split between North America, APAC, the U.K., and Europe.
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