Bracing for changes driven by regulation
Wheelhouse Advisors: Best Accounting Firm – Private equity firms in the UK and Europe must brace themselves for significant change as a wave of new regulation is due to be implemented in January 2022 and UK firms understand how to continue marketing their funds across the EU in a post-Brexit world.
The implementation of the Investment Firm Prudential Regime (IFPR) in the UK in January 2022 and its EU equivalent, the IFR, later this year will impact all firms with MiFID permissions. “They can expect to see significant changes to their capital requirements and prudential governance arrangements, including a ‘Pillar 2’ requirement to conduct and document an Internal Capital and Risk Assessment or ICARA,” comments Matthew Crisp, CEO of Wheelhouse Advisors. “We’ve been working with clients to ensure they are fully apprised of the changes, and to plan how any identified capital shortfall will be addressed.”
Getting ahead of the increased capital requirements which will be introduced by the IFPR and the IFR is vital – particularly if any restructuring is required. “For new firms considering a launch, timing may be of the essence, in order to benefit from grandfathering provisions allowing the full capital impacts to be spread over several years,” Crisp suggests.
Crisp also outlines how during 2021, UK AIFMs aiming to continue marketing funds in the EU beyond the transitional arrangements under National Private Placement Regimes will be undertaking their first AIFMD Annex IV reporting to regulators other than the FCA. In view of this, Crisp notes: “We’ve developed a great reputation over the years by applying our specialist Annex IV reporting overlay to fund administrators’ standard NAV packs, and have been growing our regulatory reporting team in response to this development.”
In this context, GPs also need to consider the extent to which the UK’s regulatory landscape will diverge from that of the EU. Crisp details: “For example, ESG is high on limited partners’ (LPs) agenda and, despite the Sustainable Finance Disclosure Regulation not applying directly in the UK, AIFMs marketing to the EU must comply. We are also seeing other clients voluntarily opting in to meet investors’ demands for transparency around ESG and sustainability.”
Crisp expects further start up activity in the industry in the coming year, as well as international firms establishing in the UK, as the Covid situation improves and now that Brexit has passed: “We anticipate significant demand for Annex IV reporting services as firms continue to market their funds across the EU. In fact, we have grown our team in preparation. We are already supporting established firms with their IFPR-readiness and with quantifying capital impacts in particular. In view of this, we are well placed to assist with their regulatory reporting and prudential governance requirements under the new regime.”
Wheelhouse Advisors has a rigorous growth plan for the year ahead and has amassed vast expertise and knowledge in certain key areas, including regulatory and financial reporting requirements, prudential management and corporate tax. Crisp underscores: “We provide comprehensive advice for spinouts, start-ups and international firms establishing a UK presence, supplemented by the expertise and experience of our partner firms. We know what’s coming down the line for our PE clients and we have the expertise and focus to help them steer through it.”
Matthew Crisp, CEO, Wheelhouse Advisors
Matthew is the CEO of Wheelhouse Advisors, leading a successful MBO of the firm in 2020, from the ACA Compliance Group, where he was a partner. Matthew holds the IMC and is a fellow of the Institute of Chartered Accountants in England and Wales. He started his career in financial services with Barclays in Hanoi in 1994, joined PwC specialising in alternative funds and their managers, before joining Sigma Partnership as a Partner in 2009. Sigma became Cordium then HedgeStart before being acquired by the ACA Compliance Group.