FSA identifies main risks in private equity

Feedback shows market abuse and conflicts of interest are main concerns

The UK Financial Services Authority (FSA) has said that feedback it has received on private equity corroborates its views that the main risks are market abuse and conflicts of interest.

The views come in the publication of responses to a June discussion paper on private equity, entitled A discussion of risk and regulatory engagement, which examined the impact that growth and development in the private equity market has on the FSA's regulation of the UK's wholesale markets.

To strengthen oversight in the arena of private equity, the FSA will improve its data collection by conducting a bi-annual survey on banks' exposures to leveraged buyouts, and enhance regulatory reporting requirements for private equity firms to incorporate information on committed capital in addition to the existing requirement to report drawn-down capital.

The FSA will also engage 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.

Separately, the FSA will be chairing a taskforce that the International Organisation of Securities Commissions (IOSCO) has commissioned to assess the impact of recent developments in the private equity market, and identify issues that can be addressed within its remit.