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The Independent (UK): FSA split-cap inquiry most expensive ever: “Shell's fine of pounds 17m last August, for overstating its oil reserves, remains the FSA's largest ever.” ( 23 Feb 05


James Daley

Feb 23, 2005


THE FINANCIAL Services Authority said yesterday it had spent almost 62,000 man hours internally, and more than pounds 6.4m in external legal fees, during its inquiry into the split-capital investment trust sector - confirming its place as the most expensive investigation in the regulator's history.


In response to a request by The Independent, under the Freedom of Information Act, the FSA said it had paid some pounds 6.43m in external lawyers fees over the 32 months to the end of 2004, with further bills expected to have been racked up since.


The regulator also said it had spent some 61,718 man hours on the investigation, but added that it was unable to put a cost on this as a result of the ranges in "salary and applicable overhead costs". With many of these hours accounted for by the FSA's own internal team of lawyers, it is likely that the total labour cost is also a sizeable seven-figure sum.


The FSA finally closed a settlement with 18 of the 22 firms involved in the split-cap sector on Christmas Eve, securing some pounds 194m for investors who lost money investing in zero dividend preference shares.


However, the deal was reached on a "no-blame" basis, with the FSA securing no financial penalties or fines to cover its costs.


It is continuing to pursue three other firms - BC Asset Management, BFS Investments and Teather & Greenwood - which were all thrown out of the group settlement by the other firms involved.


In spite of missing out on any recompense from the split-cap protagonists, the regulator's finances were buoyed by a bumper year of fines in the wider industry in 2004, levying almost pounds 25m in financial penalties against 32 firms and individuals. Shell's fine of pounds 17m last August, for overstating its oil reserves, remains the FSA's largest ever.


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