the supervision of assurance undertakings. The UK had the legal power to supervise Equitable. The Baird report stated that in January 1999, the total number of staff involved in the Government's prudential regulation of about 200 insurance companies was less than 135. The Penrose report also states that "the DTI insurance division was ill equipped to participate in the regulatory process. It had inadequate staff and those involved at line supervisor level in particular were not qualified to make any significant contribution to the process. For all practical purposes, scrutiny of the actuarial functioning of life offices was in the hands of GAD until the reorganisation under FSA was in place". More evidence also strongly suggests that the regulator adopted a conscious and deliberate "hands-off" approach with regard to the Equitable case. If this were proven to be the case, it would constitute a breach of the regulator's obligation to ensure the respect of PRE and therefore a breach of the letter and aim of Article 10 of the 3LD. Both the Baird and Penrose reports contain criticisms of the regulator's lack of a "pro-active approach". In its conclusion on p. 117, the report said that the powers bestowed on the Secretary of State (as prescribed by Section 68 of the Insurance Companies Act 1982) to waive the application of prudential regulations appear to be incompatible with the letter and the aim of the Directive, and were used inappropriately (particularly when granting authorisation on numerous occasions to include future profits in the assets available to meet the solvency margin), and that therefore ... there are serious concerns that the 3LD was not correctly transposed in full. "The committee is of the opinion that the application of the 3LD by the UK in respect of the ELAS case was deficient and that UK regulators and authorities did not adequately respect the ultimate purpose of the Directive." Legal actions by Equitable Life, 2005 In April 2005, in the light of Penrose's findings, Equitable started a £2 billion High Court action against auditors Ernst & Young, reduced 3 months later to £0.7 billion, claiming they had failed to inform the directors of the seriousness of its position. However lawyers advised they could not prove that correct advice would have changed the outcome, and the case was dropped in September. Ernst & Young described the case as "ill conceived". Simultaneously, Equitable started a £3.3