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					       The
  Securities
and Futures
 Authority




           REPORT

           AND

           ACCOUNTS
           EIGHT MONTHS ENDED


           30 NOVEMBER 2001
THE SECURITIES AND FUTURES
    AUTHORITY LIMITED
  (Registered in England & Wales - No. 1998622)




                REPORT
                  and
              ACCOUNTS
           Eight months ended
           30 November 2001

                25 The North Colonnade,
                    Canary Wharf,
                      LONDON,
                       E14 5HS




                                                  1
Chairman’s Statement
This is a report to the former members of the SFA on the final period of the SFA’s
existence. It ceased to be a self regulating organisation on 1 December 2001 when the FSA
assumed its full authority, and, as anticipated, all SFA firms started to be regulated by the
FSA. And the SFA will now shortly be dissolved.
 Since my letter of last November, which gave details of the expected final financial
arrangements of the SFA, things have gone largely according to plan, and the Board has
decided, today, to place the company into member’s voluntary liquidation.
The attached audited non-statutory accounts showing the financial position of SFA at 30
November 2001 have been approved by the Board today. We have decided to publish them
so as to render an account to the firms which were SFA members at ‘N2’ for our period of
stewardship of the company. The accounts show how the costs and revenues attributed to
the membership in this closing period have been treated, and the Board regards that
treatment as fair and reasonable. As the figures show, a proportion of the fees levied on
firms earlier in the year has been used to meet the SFA’s needs for the eight months of its
responsibility as a regulator, and the balance has been passed to the FSA to be held on
account of future fees due to the FSA from those firms which were members of the SFA at
N2.
The transfer of these remaining assets and liabilities to the FSA has taken place under a
scheme made by the FSA, with the agreement of the SFA, under Article 21 of the Financial
Services and Markets Act 2000 (Miscellaneous Provisions) Order 2001. The accounts
presented to you now reflect the position after the commencement of that scheme.
Both your Board and the FSA were keen to avoid the need for any adjustment to the closing
position. Accordingly all actual and foreseeable financial obligations have been included
within these accounts. This includes, in particular, a total of £2.3m received by the SFA by
way of disciplinary revenues after the balance sheet date of 30 November 2001.Normally,
this amount would have been included in the subsequent period. We have, therefore,
departed from previous accounting policy in this respect.
Because of the transfer of assets and liabilities to the FSA, there will be no future financial
requirements of SFA. So it will be seen, from the balance sheet on page 9, that SFA’s
reserves have now been fully utilised in meeting the costs to 1 December 2001 (and trifling
costs incurred or provided for since) and in effecting the transfer to the FSA of £17.2M
(shown under creditors in Note 9 on page 15) for the purposes mentioned above.
The FSA’s own plans for the treatment of the money transferred have been set out in their
consultative paper on fees, CP111 and I believe that relevant former members of the SFA
will soon receive a specific note from the FSA indicating what their individual account
balance is, and how that relates to the FSA’s own revenue raising activities.
The Board of the SFA lay down their responsibilities with effect from tonight, and a
liquidator will now take the company through to dissolution.


Michael Blair QC
Chairman

11 March 2002

                                                                                             2
Directors’ Report
The directors have pleasure in presenting their special report and non-statutory financial
statements for the eight months ended 30 November 2001.
The Company was a self-regulating organisation (SRO) under the Financial Services Act
1986 until its regulatory activities transferred to FSA on 30 November 2001 on
commencement of the Financial Services and Markets Act 2000. SFA’s regulatory activities
having ceased, the Company is now in the process of being wound up.

PRINCIPAL ACTIVITIES
The principal activities of the Company, all of which ceased on 30 November 2001 were:

¨ to maintain rules and practices which satisfy the requirements for continued recognition
  as an SRO by the Financial Services Authority (FSA);

¨ to provide authorisation under the Financial Services Act 1986 to fit and proper persons
  conducting investment business within its regulatory scope;

¨ to regulate the carrying on of investment business with which it is concerned; and

¨ to ensure that authorised firms remain fit and proper and maintain high standards of
  integrity, competence and practice.

DIRECTORS
The following Directors held office at 30 November 2001 having served throughout the
period: -
MICHAEL BLAIR QC, Chairman
MR R. J. SINCLAIR

LORD EATWELL

FINANCIAL REPORT
The financial position of the company remained healthy throughout the period. Revenues
were supported by receipts from disciplinary actions against firms and individuals.

As anticipated SFA raised fees on behalf of itself and of FSA in April 2001. The fees so
raised were recalculated for the period 1 April 2001 to ‘N2’ and the balance collected by
SFA for 2001/2002 on behalf of FSA was passed to the FSA for the credit of individual SFA
firms. The arrangement was communicated to firms in Board Notice 577 published on 9
March 2001.

The deficit after tax of £1,275,000 has been transferred from reserves.


                                                                                         3
CORPORATE GOVERNANCE
The Company does not comply fully with the Combined Code on Corporate Governance.
However, given the nature of the Company’s current operation, the Board believes that it is
in compliance with aspects of the Code which are relevant to a regulatory authority, and are
set out below.

The Board consists of non-executive Directors and meets regularly to address a formal
schedule of matters reserved for its approval.

INTERNAL FINANCIAL CONTROL
The Board of Directors has overall responsibility for the Company’s system of internal
financial control and reviews the effectiveness of that system from time to time.

The finance function of the Company was fully transferred to the FSA on 1 March 1999.
This service is provided in accordance with the Service and Finance Agreement dated 4 June
1998 which sets out agreed service standards. The Finance Department of the FSA is
required under this agreement to provide regular reports to the Company as evidence of the
proper maintenance of those standards.

Adherence to the agreed standards is subject to review by the Quality Assurance Team of the
FSA which reports independently to the Board of the Company on a quarterly basis.

The financial controls in operation enable the Board to meet its responsibilities for the
integrity and accuracy of the Company’s accounting records and compliance with accepted
accounting practices.

The FSA operates on the Company’s behalf, and through the Services and Finance
Agreement, a comprehensive budgeting and financial reporting system which as a matter of
routine compares actual out-turn to budgets and approved business plans. Management
accounts are prepared on a monthly basis and any significant variances to plan are
investigated with forecasts being updated regularly as appropriate.

CREDITORS PAYMENT POLICY
The Company’s policy for payments to creditors is executed on its behalf by the FSA. The
terms of payment are settled with suppliers when agreeing the terms of each transaction and
it is the Company’s policy to abide by those terms, provided that suppliers also comply with
all relevant terms and conditions.




                                                                                          4
GOING CONCERN
The regulatory responsibilities of the Company transferred to the FSA on commencement of
the Financial Services and Markets Act 2000 on 30 November 2001. Because the Company
is expected to be wound up shortly, the accounts have been prepared on a ‘break up’ basis.

STATEMENT OF DIRECTORS’ RESPONSIBILITIES
Company law requires the directors to prepare financial statements for each financial year
which give a true and fair view of the state of affairs of the Company and of the surplus or
deficit of the Company for that period. In preparing those financial statements, the directors
are required to:

·   select suitable accounting policies and then apply them consistently;

·   make judgements and estimates that are reasonable and prudent;

·   state whether applicable accounting standards have been followed, subject to any
    material departures disclosed and explained in the financial statements;

·   as discussed above, the directors have concluded that the going concern basis is not
    appropriate for these financial statements.

The directors are responsible for keeping proper accounting records which disclose with
reasonable accuracy at any time the financial position of the Company and to enable them to
ensure that the financial statements comply with the Companies Act 1985. They are also
responsible for safeguarding the assets of the Company and hence for taking reasonable
steps for the prevention and detection of fraud and other irregularities.

AUDITORS
A resolution was passed at the Company’s 2001 Annual General Meeting reappointing
Messrs Pricewaterhousecoopers.

By Order of the Board




LYNDA BLACKWELL
Secretary

11 March 2002




                                                                                            5
Auditors' report to the members of The Securities and
Futures Authority Limited
We have audited the financial statements which comprise the profit and loss account, the
balance sheet, the cash flow statement, the related notes and the accounting policies set out
in the statement of accounting policies on page 11.

These financial statements have not been prepared under section 226 of the Companies Act
1985.


Respective responsibilities of directors and auditors

The directors’ responsibilities for preparing the report and the financial statements in
accordance with applicable accounting standards are set out in the statement of directors’
responsibilities.

Our responsibility is to audit the financial statements in accordance with relevant legal and
regulatory requirements and United Kingdom Auditing Standards issued by the Auditing
Practices Board.

We report to you our opinion as to whether the financial statements give a true and fair view
and are properly prepared in accordance with the Companies Act 1985. We also report to
you if, in our opinion, the directors’ report is not consistent with the financial statements, if
the company has not kept proper accounting records, if we have not received all the
information and explanations we require for our audit, or if information specified by law
regarding directors’ remuneration and transactions is not disclosed.

We read the other information contained in the annual report and consider the implications
for our report if we become aware of any apparent misstatements or material inconsistencies
with the financial statements. The other information comprises only the directors’ report and
the chairman’s statement.


Basis of audit opinion

We conducted our audit in accordance with auditing standards issued by the Auditing
Practices Board. An audit includes examination, on a test basis, of evidence relevant to the
amounts and disclosures in the financial statements. It also includes an assessment of the
significant estimates and judgements made by the directors in the preparation of the financial
statements, and of whether the accounting policies are appropriate to the company’s
circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations
which we considered necessary in order to provide us with sufficient evidence to give
reasonable assurance that the financial statements are free from material misstatement,
whether caused by fraud or other irregularity or error. In forming our opinion we also
evaluated the overall adequacy of the presentation of information in the financial statements.


                                                                                                6
Opinion

In our opinion, the financial statements give a true and fair view of the state of the
company's affairs at 30 November 2001 and of its loss and cash flows for the eight-month
period ended 30 November 2001.



PricewaterhouseCoopers
Chartered Accountants and Registered Auditors
London               11 March 2002




                                                                                           7
Income and Expenditure Account for the eight months ended 30
November 2001
                                                                 8 Months to       Year ended
                                                                30 November         31 March
                                                       Notes           2001              2001

                                                                        £000           £000
Expenditure:
   Administrative expenses                               (2)           21,197         30,777
   FSA levy                                                             2,580          4,088
   ICS levy and other compensation costs                 (3)              -            2,263
Total expenditure                                                      23,777         37,128

Income other than fees from firms:
   Received from firms and individuals in respect
   of enforcement actions:-
        - fines                                                         4,422          1,745
        - cost recoveries                                               1,119            334
   Interest receivable and similar income                                 586            928
   Other income                                          (4)              922          1,141
                                                                        7,049          4,148
Expenditure less other income                                          16,728         32,980
Fees:
   SFA fees from firms                                                 15,358         31,214
   ICS and compensation levy                             (3)                   -       2,263
Total fees and levies                                                  15,358         33,477
(Deficit)/Surplus for the period before taxation                      (1,370)            497
Taxation recovery/(charge)                               (5)                  95         (95)

(Deficit)/Surplus for the period after taxation         (12)          (1,275)            402


The Company has no recognised gains and losses other than those included above, and
therefore no separate statement of total recognised gains and losses has been presented.

There is no difference between the deficit for the year before taxation and the deficit for the
year after taxation as stated above, and their historical cost equivalents.

The results above relate entirely to discontinued activities.




                                                                                                8
BALANCE SHEET
as at 30 November 2001
                                                     Notes              30
                                                                  November        31 March
                                                                      2001            2001

                                                                       £000          £000
Current assets
Debtors                                                (8)             4,382         2,787
Cash at bank and in hand:
-   Deposits                                                          14,843         6,744
-   Current accounts                                                         33      2,073
Total current assets                                                  19,258        11,604
Creditors – amounts falling due within one year
Creditors                                              (9)            18,988         4,170
Fees received in advance                              (10)                -          5,889


Total current liabilities                                             18,988        10,059
Net current assets                                                       270         1,545
Total assets less current liabilities                                    270         1,545
Provisions for liabilities and charges                (11)               270              270
Net assets                                                               -           1,275
Represented by:-
Reserves                                              (12)               -           1,275


The financial statements on pages 8 to 17 were approved by the Board of Directors on 11
March 2002 and signed on its behalf by:




MICHAEL BLAIR QC, Chairman




R. J. SINCLAIR, Director




                                                                                           9
Cash Flow Statement for the eight months ended 30 November 2001

                                                               8 Months       Year
                                                                   to 30   ended 31
                                                              November       March
                                                      Notes        2001        2001
                                                                  £000       £000
Operating activities:
Net cash (outflow)/inflow from operating activities    (14)       5,473     (7,714)
Returns on investments and servicing of finance:
- interest received                                                 586        928
Net cash (outflow)/inflow from returns on
investments and servicing of finance                              6,059       (928)
Taxation:
-   UK corporation tax recovered                                       -          -
Tax recovered                                                          -          -
Cash inflow /(outflow) before management of
liquid resources and financing                                              (6,786)
                                                                  6,059
Management of liquid resources                         (17)     (8,099)      6,318
(Decrease) in cash in the period                       (15)     (2,040)       (468)




                                                                                 10
NOTES TO THE FINANCIAL STATEMENTS

1   Accounting Policies

A   Basis of Accounting

    These financial statements are not prepared under section 226 of the Companies Act
    1985. The financial statements have been prepared on the historical cost basis.

B   Basis of Preparation

    On 30 November 2001 the company’s formal activities as a regulator ceased and
    responsibility for all such activities passed to its parent company, the Financial
    Services Authority. These accounts have therefore been prepared on a break up basis.


C   Fees

    Fees comprise the amounts due to and collected by the Company in the period. The
    amount has been calculated so as to leave only the minimum level of reserves in the
    Company to permit its solvent winding up.

D   Investment Income

    Interest income on short-term bank deposits and investments is accounted for on a
    receivable basis.

E   Income and Expenditure Account

    The format of the income and expenditure account on page 8 has been modified from
    the format specified in the Companies Act 1985 to show expenses before income and
    before fees levied to recover those expenses. It is considered that this format best
    represents the nature of the Company’s activities which involved carrying out its
    regulatory obligations and levying fees to meet expenses consequent upon those
    obligations.

F   Enforcement Actions

    The Company recognised income from enforcement actions on receipt when a fully
    going concern. However in view of the intention to place the company in members
    voluntary liquidation at an early date, this policy is no longer considered appropriate.
    Accordingly income from enforcement action has been recognised in the current
    period to the extent that the Directors are of the opinion that the sums so levied are
    expected to be recovered within a reasonable time from the balance sheet date. The
    effect of this change has been to recognise a further £2,264,000 in respect of income
    from enforcement actions.

    The effect of this change in accounting policy on the 2000/01 financial results is not
    material. As a result, the prior year comparatives have not been restated.



                                                                                         11
2        Administrative Expenses
                                                                     8 Months to
                                                                    30 November Year ended 31
                                                       Notes               2001   March 2001
                                                                           £000             £000

Service charge payable to the FSA (see below)                             19,076           28,167
Service charge payable to FOS (see below)                                    620                 481
Directors’ and staff emoluments                       (6) & (7)              473                 575
Other staff costs                                                               -                 38
Professional fees                                                            931            1,212
Remuneration of the auditors for:
-   audit of the Company                                                      32                  30
-   non audit services for the Company (see below)                            28                  11
Non-recoverable VAT                                                             -                (5)
Other costs                                                                   37                 268
                                                                          21,197           30,777


Notes:
Practical support to the Company to discharge its regulatory and statutory duties has been
provided by the FSA under a Service and Finance Agreement from 1 June 1998. From that
date the majority of costs incurred to enable the Company properly to discharge its
functions, including most staff costs, have been borne by the FSA and charged to the
Company in accordance with the terms of the Agreement. FSA’s charges covered the costs
attributed to the Company based on the time spent by members of staff in providing the
services plus costs which may be fairly attributed to the Company. The Company retained
responsibility for some costs, for example directors’ fees and professional fees in connection
with the disciplinary matters which are disclosed separately.


The Company entered into an Agreement with the Financial Ombudsman Service Limited
(‘FOS’) on 31 March 2000 whereby the services previously provided by FSA in relation to
the handling of complaints against SFA firms would be provided by FOS with effect from 1
April 2000. When FOS became the single UK Ombudsman on 30 November 2001,
responsibility for all outstanding complaints passed to FOS and, subject to certain
transitional arrangements, the Agreement then ceased.


Remuneration of auditors in respect of non-audit services is in respect of taxation and other
advice: £28,000 (2000/01: £11,000).




                                                                                           12
3      ICS Levy and other compensation costs

On 30 November 2001, when the Financial Services Compensation Scheme (FSCS) became
the single compensation scheme in the U.K., and existing schemes, including The Investors’
Compensation Scheme (ICS), were replaced. Prior to its amalgamation into FSCS, ICS
confirmed that it would not seek to raise a further levy on the SROs, including SFA, during
the remainder of the current financial year. Accordingly the sum of £2,263,000 levied by
ICS in April 2001, relating to the scheme year 2000/2001 and which was accrued in the
accounts for the year ended 31 March 2001 was paid to ICS in May 2001. The ICS levy
costs were recovered from firms by a direct levy during the period. No further liability will
accrue to SFA.


4      Other Income
                                                              8 Months to      Year ended
                                                             30 November        31 March
                                                                    2001             2001
                                                                    £000             £000
Examination exemption fees                                            144              231
Publications                                                            72             230
Other services                                                          23              14
Recovery of ‘direct reporting’ costs                                  683              666
                                                                      922            1,141


5      Taxation
                                                              8 Months to      Year ended
                                                             30 November        31 March
                                                                    2001             2001
                                                                    £000            £000
UK corporation tax – Current period - recovery                         95                -
                     Prior year - (charge)                               -            (95)
                                                                       95             (95)

After marginal relief, the effective taxation rate for the period ended 30 November 2001 was
nil (2000/01: 23%).




                                                                                          13
6      Remuneration of Directors
                                                            8 Months to         Year ended
                                                           30 November           31 March
                                                                  2001                2001
                                                                       £                 £
Fees and other emoluments                                          94,740           369,625


Fees and other emoluments includes amounts paid to:


                                        8 Months to 30 November      Year ended 31 March
                                                           2001                     2001
                                                        Highest                     Highest
                                                           Paid      Chairman          Paid
                                        Chairman
                                                        Director                    Director
                                                  £            £                £            £
Fees                                        23,740        36,250       35,000        36,125



7      Emoluments of Employees

There were no employees in the period, accordingly there are no staff costs shown in the
accounts. Last year employee emoluments amounted to £205,490; Social security costs
amounted to £29,786 and Pension costs amounted to £Nil. The average number of
employees employed in the 2000/01 year was 2.


                                                                    At 30            At 31
8      Debtors                                                  November            March
                                                                    2001             2001
                                                                      £000            £000
Amounts falling due within one year:
-   trade debtors                                                    4,289             436
-   other debtors and prepayments                                       93           2,281
-   accrued income                                                          -           70
                                                                     4,382           2,787




                                                                                         14
9       Creditors
                                                                    At 30         At 31
                                                                November         March
                                                                    2001          2001
                                                                      £000         £000
Amounts falling due within one year:
-    due to FSA in respect of fees collected from SFA firms         17,177             -
-    accruals                                                          573           371
-    corporation tax                                                      -           95
-    other taxation and social security                                 34            52
-    amount due to FSA                                                 997           791
-    other creditors                                                   207         2,861
                                                                    18,988         4,170

10      Fees received in advance

As at 31 March 2001 remittances of £5,889,000 had been received from firms in respect of
fees for the forthcoming year.


11      Provisions for liabilities and charges
                                                                                  £000
At 1 April 2001                                                                     270
Utilised in the period                                                                 -
At 30 November 2001                                                                 270

The provision relates to anticipated costs in the liquidation of Branston and Gothard
Limited, a former member firm. The liquidation is ongoing, however, there is uncertainty as
to the amount and timing of any future transfer of economic benefits. The provision of
£270,000 at 30 November 2001 is a prudent estimate of the liability and is based on advice
from the liquidator.

12      Reserves
                                                                                   Total
                                                                                   £000
At 1 April 2001                                                                    1,275
Surplus for the period after taxation                                            (1,275)
At 30 November 2001                                                                    -



                                                                                        15
13     Firms’ Guarantees

The Company is limited by guarantee. In the event of winding up, the liability of members
is limited to £1 each. At 30 November, prior to the transfer to FSA the Company had 1,428
authorised firms (at 31 March 2001: 1,373).


14     Net cash inflow/(outflow) from operating activities
                                                                             8 Months to      Year ended
                                                                            30 November        31 March
                                                                                   2001             2001
                                                                                   £000               £000
(Deficit)/Surplus before taxation                                                (1,370)               497
Interest receivable                                                                (586)             (928)
Operating (Deficit)                                                              (1,956)             (431)
(Increase)/Decrease in trade debtors                                             (3,853)             (406)
(Increase)/Decrease in other debtors, prepayments and accrued                     2,258                (55)
income
(Decrease)/Increase in trade and other creditors                                 (2,448)             1,021
(Decrease) in other taxation and social security creditors                             (18)            (19)
(Decrease) in income received in advance                                         (5,889)            (7,771)
Increase/(Decrease) in accruals                                                        202             (53)
Increase in amount due to FSA in respect of fees collected from firms            17,177                   -
Net cash Inflow/(Outflow) from operating activities                               5,473             (7,714)

15     Analysis of Changes in Net Funds:


                                                                                                  At 30
                                                             At 1 April                       November
                                                                  2001    Cash Flow               2001
                                                                  £000         £000                  £000


Current Accounts                                                 2,073       (2,040)                   33
Deposits                                                         6,744        8,099              14,843
                                                                 8,817        6,059              14,876




                                                                                               16
16     Reconciliation of Net Cash Flow to Movement in Net Funds


                                                                 8 Months to   Year ended
                                                                30 November     31 March
                                                                       2001          2001
                                                                       £000          £000
(Decrease) in cash in the period                                     (2,040)        (468)


Cash inflow /(outflow) from increase in liquid resources              8,099       (6,318)
Movement in net funds in the period                                   6,059       (6,786)
Net funds at beginning of Period                                      8,817        15,603
Net funds at end of Period                                           14,876         8,817


17     Management of Liquid Resources
                                                        30    31 March 2001     Change
                                                  November                        in the
                                                      2001                       period


                                                       £000           £000         £000
Deposits                                             14,843           6,744       8,099
                                                     14,843           6,744       8,099



18     Ultimate Parent Company

The company’s ultimate parent company is the Financial Services Authority, a company
limited by guarantee and registered in England and Wales.
Copies of the FSA group accounts can be obtained from the company’s registered office at
25 The North Colonnade, Canary Wharf, London E14 5HS.




                                                                                       17

				
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