The FSA will expand the regulatory regime for private equity firms after assessing the impact of private equity on the UK wholesale markets.
The regulator says companies will now have to include information about committed capital on top of its current requirement to declare all drawn down capital.
The FSA also says it will conduct a bi-annual survey of banks’ exposures to leveraged buyouts.
The changes have been made as a result of feedback to its Discussion Paper 06/6 Private Equity: A discussion of risk and regulatory engagement, which was published in November last year.
It examined the impact growth and development in the private equity market has on the FSA's regulation of the UK's wholesale markets, identifying the risks it sees could pose a threat to its statutory objectives.
The regulator says the most significant risks are those posed by market abuse and conflicts of interest.
It says these will remain key areas of regulatory focus and announced its alternative investments supervision team will be conducting further work in relation to conflicts of interest in private equity firms.
On top of its bid to improve data collection on private equity firms, the FSA says it will be engaging 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. It says this is required due to the increasing complexity of financing and risk distribution typically associated with leveraged buyout transactions.
Also, the International Organisation of Securities Commissions (IOSCO) has commissioned a taskforce to assess the impact of recent developments in the private equity market and identify issues which can be addressed within its remit. The FSA will be chairing the work of this taskforce.
Hector Sants, FSA managing director of wholesale business, says: “The feedback we have received to the November paper has confirmed that the current approach to supervising this market is broadly appropriate.
“However we remain committed to working with firms to ensure that our supervisory capability continues to remain highly focused on the key regulatory issues.
“When considering this document it is important to understand that we have restricted ourselves to addressing those issues which fall within the FSA's remit.”
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