More than a third (34%) of private market professionals take a last-minute approach to planning for new regulations, as they struggle with the volume, speed, and complexity of regulatory changes, according to a research.
The research, commissioned by business administration and compliance solutions provider CSC, involved 400 C-suite executives and senior professionals in private markets.
The lack of early regulatory preparation is particularly pronounced in North America, where 42% of respondents admitted to delaying their planning until just before the regulations take effect. In contrast, Asia-Pacific professionals are more proactive, with 66% identifying and planning for new regulations well ahead of deadlines.
The CSC study, which focussed on the role of special purpose vehicles (SPVs) in optimising private market investments, highlighted challenges in responding to regulatory changes. 69% of senior professionals in private markets reported difficulties in managing SPVs amid evolving regulations.
Private markets pros predict better deal making conditions
“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,” said 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.”
Specific regulations such as DAC6, FATCA, and CRS have proven particularly challenging, with nearly two-thirds of respondents (65% and 64%, respectively) struggling to address their impact on SPV administration. Ultimate beneficial ownership registration and filings also present difficulties, with 58% of professionals finding it hard to comply.
Adding to the challenge is the difficulty in finding qualified staff with expertise in global regulations. Almost 71% of respondents cited access to suitably qualified staff as a significant challenge in setting up and running SPVs.
“Finding suitable staff, particularly in legal and compliance, is becoming increasingly tough due to the competitive market,” van Ingen added. “As deals grow more complex and cross borders, it’s crucial to have experts who can navigate diverse regulatory environments.”
Delphine Jones, managing director of Client Solutions at CSC, emphasised the value of outsourcing SPV management: “In a world of sophisticated regulation, outsourcing can help sponsors stay current with all regulatory developments, simplifying one of the most significant and risky aspects of using SPVs.”
