Memorandum submitted by the Financial
On 2 July the Committee asked (Q 388) for a
note on the fees which the FSA pays to external consultants. As
Howard Davies explained in oral evidence, as part of our supervision
of individual firms, from time to time we commission what are
called in the legislative language "reports by skilled persons".
These are often carried out by the auditors of the regulated firm
concerned and involve a report to the firm and to us on aspects
of the firm's business, for example its risk management systems
or its claims reconciliation procedures. In such cases the regulated
typically nominates the skilled person,
for our approval.
The purchasing decision is therefore not the
FSA's, and we do not cover such work in this note.
In relation to the financial year ending 31
March 2002 the position is as follows:
as recorded in our Annual Reportsee
Table 8.3 on page 59we spent £10.1 million on professional
fees within our "control total". This covers a range
of outsourced services and projects, for example the consumer
relations helpline and research to inform our policy work on polarisation;
in addition, we incurred professional
fees of £6.0 million in areas which do not fall without our
control total costs. These included external enforcement costs
and the costs of the Baird review of our regulation of Equitable
Life. See page 57 of the FSA Annual Reportthis is a combination
of the external enforcement costs £2.7 million and the regulatory
review costs £3.3 million;
regarding the FSA's level of expenditure
with accountancy firmsof the totals outlined in the previous
two bullets, the FSA's spend with accountancy firms is £5.6
million. £5.2 million of this goes to the "Big Four/Five"
with the remainder going to the smaller firms. Out of the £5.2
million, £3.4 million relates to professional fees and £1.8
million relates to secondees.
We would also like to flag to you an inaccuracy
in the joint Memorandum to the Committee submitted by DTI and
Treasury. Paragraph 7, describing our listing function, is actually
a description of the way we regulate firms; it is not a correct
description of the work we do as the UK Listing Authority.
25 July 2002