One-third of FTSE 500 companies expect to be investigated by a regulator within the next 12 months, while the number that turn to specialist regulatory lawyers for advice on setting up their compliance procedures has doubled in just three years, research has revealed.

The poll of 100 businesses - conducted by City firm DLA Piper Rudnick Gray Cary - found that 75% of respondents would turn to specialists for regulatory compliance work, up from 38% in a similar survey carried out by the firm in 2002.


But more than two-thirds (69%) said they would get advice from their usual corporate lawyers, while half (55%) would use their accountancy firm or auditor and one-third (34%) would involve management consultants.


FSA: can force entry to premises

DLA's 2005 regulatory awareness survey also revealed an increase in the use of specialists during a regulatory crisis - some 82% of FTSE 500 companies said they would turn to them in such circumstances, with the protection afforded by professional privilege a key factor in that choice.

Neil Gerrard, head of the firm's legislative and regulatory group, said: 'How daft can it be that non-specialists are dealing with these issues? You can get enthusiastic amateurs having a stab at managing regulatory issues. But what could be more important than, for example, making sure you are not disqualified as a director?'


Nine out of ten FTSE 500 companies acknowledged that the risk of punitive consequences for regulatory breaches has increased in recent years.


But the survey revealed considerable confusion about the extent of regulators' powers of enforcement, even though one-third of respondents expect an investigation within the next year.


Only 12% knew that the Financial Services Authority can use force to enter premises if it has a warrant, and only 13% knew that the Department of Trade and Industry can do so without a warrant. Only 13% knew that the competition authorities can seek a custodial sentence.


Mr Gerrard said: 'One-third [saying an investigation is likely] is an alarmingly high figure. Enforcement is a major issue - the government has made it very clear that it takes it very seriously.'


He added that businesses were not acting with sufficient focus - the survey revealed that only slightly more than a quarter have a specialist regulatory manager. At other businesses, the work is seen as an add-on to the responsible person's usual job.


Mr Gerrard added: 'The disappointing thing is that, when you do internal audit reviews of compliance procedures, (you find) there is an awful lot of outdated stuff.'