FCA set to overhaul hedge fund and alternative investment rules
The Financial Conduct Authority has launched a consultation to soften regulations on hedge fund and alternative investment management rules.
In an announcement today, the Treasury said it will be lifting the size threshold for alternative asset managers to be subjected to the main rules for the sector, from £100m in assets under management to £5bn.
In addition, a lighter regime of regulation will be implemented for smaller alternative investment managers.
Leonard Ng, partner at Sidley, said the splits were “very interesting, as it allows for a more refined framework to apply rules proportionately to different tiers of firms”.
“Industry will of course want to consider whether the suggested thresholds are the right ones (and indeed whether a different test should be used altogether), but this is certainly a step in the right direction,” he added.
The existing rules for alternative asset managers were negotiated mostly in 2010-2011 as a direct reaction to the global financial crisis, leaving many in the private equity industry calling for an update of the rules.
The FCA launched a call for input, aiming to develop simpler and more competitive regulations for the sector.
The watchdog also said it was considering regulating investment trusts and venture capital firms separately “due to those sectors’ distinct characteristics”.
City minister Emma Reynolds said that the changes were part of a plan to make Britain “the number one place to do business” through “tearing down unnecessary barriers to investment, such as costly regulation”.
“This consultation is an important step in securing the UK’s status as one of the world’s leading private capital hubs,” said Michael Moore, chief of the British Venture Capital Association.
“We look forward to engaging on the principles and the detail of the changes, but this provides the opportunity to create a real boost for the government’s growth mission by developing the UK’s private capital fund ecosystem and increasing inward investment in UK SMEs.”