Compliance Leaders Discuss Evolving Expectations in Private Equity

Private equity firms continue to face a shifting regulatory landscape, with increasing expectations around governance, valuation, and financial crime controls. At a recent peer discussion tailored to the sector, compliance leaders at our latest Compliance Officer’s Breakfast in London explored how firms are adapting to these pressures in real time.

The session was co-hosted by Michael Strug, Director in ACA’s UK Regulatory Advisory team, and James Wallace, Partner at Simmons & Simmons, both bringing deep expertise in private equity regulation.

Below are the key takeaways from the discussion. For more detailed recommendations, download our guide, Adapting Governance and Controls in Private Equity.

Structure Governance and Record Keeping for Long-Term Resilience

The session opened with a deep dive into the evolving expectations around governance, particularly in light of the FCA’s proposed SM&CR reforms. These changes aim to reduce administrative burden and clarify requirements, with a two-phase rollout:

• Phase 1 introduces a 12-week rule for temporary coverage, improved visibility on record checks, and streamlined application processes.
• Phase 2 is expected closer to 2027, will further refine responsibilities and guidance.

Firms are increasingly conducting governance reviews not just for compliance, but to build resilient frameworks that support long-term growth. However, challenges persist, especially for larger or global firms where UK governance expectations may clash with U.S.-centric operating models. Attendees noted the importance of:

• Educating overseas senior managers on UK regulatory obligations.
• Embedding UK leadership into global governance structures.
• Using policy language that prioritises UK regulatory needs when necessary.

A recurring theme was the difficulty in evidencing governance historically, particularly during leadership transitions. Yet, firms that have invested in robust structures are now seeing dividends in clarity and accountability.

When it comes to oversight of IT leadership roles, opinions varied on whether the Chief Executive Officer (CEO), Chief Operating Officer (COO), or Chief Compliance Officer (CCO) should take the lead, but consensus emerged around the importance of recordkeeping, controls, and board-level reporting.

Prepare for Regulatory Focus on Conflicts of Interest and Valuation

With the FCA announcing a review of private markets in H2 2025, conflicts of interest and valuation practices are firmly in the spotlight, with some firms already being contacted. The discussion covered:

• Different business models that are under review, such as syndication, co-investments, and two-fund deals.
• Different approaches to conflicts registers, from theoretical inventories that capture all potential conflicts, to practical logs that focus only on material issues.

A practical approach that was discussed is to establish a central reporting point for conflicts, ensuring compliance visibility and allowing only significant items to be escalated to a formal log. This could be implemented via inboxes, workflow systems, or collaboration tools like Microsoft Teams.

On valuation, the FCA emphasised proportionality and the need for fit-for-purpose frameworks. Compliance teams are expected to play a more active role in:

• Testing valuation methodologies
• Participating in governance reviews
• Supporting documentation and challenge processes

While some business teams still question the value that compliance can add to nuanced valuation scenarios, the consensus was clear: involvement must be tailored, but it cannot be passive.

Want to learn more? Listen to our on demand webcast, Conflicts of interest under the FCA Microscope.

Balance Internal Governance with LP Expectations

The role of Limited Partner Advisory Committees (LPACs) in conflict resolution was also discussed. Most firms agreed that involving LPACs in these decisions is rare and often impractical. Instead, the focus tends to be on establishing strong internal governance processes and ensuring that disclosures in offering documents are carefully tailored to the specific conflict, rather than relying on generic language.

While some firms may consult LPACs in cases of true material conflicts, this remains the exception rather than the norm.

Respond to Renewed Enforcement on Financial Crime and AML

The final session focused on financial crime, where recent enforcement actions have highlighted deficiencies in:

• Risk assessments and monitoring
• Governance and management information quality
• Proportionate controls aligned to business growth
• Senior management AML experience

A key development discussed was the Economic Crime and Corporate Transparency Act (ECTA), which introduces a new corporate offense for failing to prevent fraud. Under this law, firms can be held liable if someone commits fraud for their benefit, unless they can demonstrate adequate prevention measures.

Vendor oversight was another area of concern, particularly around administrators and portfolio companies. Attendees emphasised the need for:

• Stronger AML diligence on vendors and admins
• Clear risk frameworks that reflect the firm’s growth and complexity
• Education and training for portfolio companies on AML obligations

When it comes to third-party oversight and vendor risk, firms are encouraged to implement structured vendor due diligence programmes, including periodic reviews, onboarding protocols, and risk-based assessments to ensure third-party compliance.

Final Thoughts

The breakfast reinforced the value of peer-led dialogue in navigating regulatory complexity. As private equity firms face increasing scrutiny, the role of compliance is evolving, from reactive gatekeeper to proactive partner in governance, valuation, and risk management.

Working with a specialist partner that understands the nuances of private equity regulation helps bridge the gap between compliance obligations and commercial realities, delivering clarity and confidence when it matters most.

Download our peer insights, Adapting Governance and Controls in Private Equity, to get practical recommendations to benchmark your approach and prepare for upcoming regulatory changes, increased scrutiny, and evolving compliance expectations.