FEES 6.4 Management expenses

Obligation on participant firm to pay

FEES 6.4.1RRP

A participant firm must pay to the FSCS a share of each management expenses levy.

Limit on management expenses

FEES 6.4.2RRP

The total of all management expenses levies (taken together with the management expenses levies under the PRA Rulebook)5 attributable to a particular period of the compensation scheme may not exceed the limit applicable to that period set out in FEES 6 Annex 1 R.

Participant firm's share

FEES 6.4.3RRP

A participant firm's share of a management expenses levy consists of one or more of: (1) a share of a base costs levy and (2) a share of a specific costs levy.

11
FEES 6.4.4RRP

The FSCS must ensure that each participant firm's share of a management expenses levy separately identifies the firm's share of the base costs levy and1 specific costs levy .

11

Base costs levy

FEES 6.4.5RRP

Subject to3 FEES 6.3.22 R, the FSCS must calculate a participant firm's share of a base costs levy by:

33
  1. (1)

    for recognised investment exchanges, providing for £1,000 per RIE for each financial year of the compensation scheme (other than in the financial year in which the recognised investment exchange becomes a participant firm, when its share is nil);6

    5335
  2. (2)

    for other participant firms:6

    5533
    1. (a)

      identifying the base costs which the FSCS has incurred, or expects to incur, in the relevant financial year6 of the compensation scheme, but has not yet levied and allocating 50% of those base costs (less any contribution to be made by recognised investment exchanges under (1))6 as the sum to be levied on participants in all the activity groups listed in FEES 4 Annex 1AR;6

      3
    2. (b)

      calculating the amount of the participant firm’s regulatory costs6 as a proportion of the total regulatory costs relating to all participant firms (other than recognised investment exchanges)6 for the relevant financial year; and6

      3
    3. (c)

      applying the proportion calculated in (b) to the sum in (a).6

FEES 6.4.5AGRP

[deleted]5

3
FEES 6.4.5BG

5The FCA and the PRA each allocate 50% of the base costs in a given financial year of the compensation scheme in accordance with their respective rules.

Specific costs levy

FEES 6.4.6ARRP

4The FSCS must allocate any specific costs levy:

  1. (1)

    first, amongst the relevant classes in proportion to the amount of relevant costs arising from the different activities for which firms in those classes have permission up to the levy limit of each relevant class. The FCA provider contribution classes are not relevant classes for this purpose; and

  2. (2)

    thereafter, where the levy limit has been reached (whether as a result of compensation costs or specific costs or both) for a class whose attributable costs may be allocated to the retail pool (see FEES 6 Annex 5R5), to the retail pool, in accordance with and subject to FEES 6.5A.

FEES 6.4.7AR

4The FSCS must calculate a participant firm's share of a specific costs levy (subject to FEES 6.3.22 R (Adjustments to calculation of levy shares) by:

  1. (1)

    identifying each of the relevant classes to which the participant firm belongs, using the statement of business most recently supplied under FEES 6.5.13 R;

  2. (2)

    identifying the management expenses other than base costs which the FSCS has incurred, or expects to incur, in the relevant financial year5 of the compensation scheme, allocated to the classes identified in (1), but not yet levied;

  3. (3)

    calculating, in relation to each relevant class, the participant firm's tariff base (see FEES 6 Annex 3AR5) as a proportion of the total tariff base of all participant firms in the class5;

  4. (4)

    applying the proportion calculated in (3) to the figure in (2); and

  5. (5)

    if more than one class is relevant, adding together the figure in (4) for each class.

New participant firms

FEES 6.4.8RRP

A firm or a recognised investment exchange6 which becomes a participant firm part way through a financial year5 of the compensation scheme will not be liable to pay a share of a specific costs levy made in that year.

FEES 6.4.9G

[deleted]1

FEES 6.4.10GRP

Since a firm that becomes a participant firm in the course of a financial year5 of the compensation scheme will already be obtaining a discount in relation to the base costs levy through the modified fee provisions of FEES 4.2.7ER7, no rule is necessary in FEES 69 for discounts on the base costs levy.1

19

Specific costs levy for newly authorised firms

FEES 6.4.10ARRP
  1. (1)

    22This rule deals with the calculation of:

    1. (a)

      a participant firm's specific costs levy in the financial year5 of the compensation scheme5 following the financial year of the compensation scheme5 in which it became a participant firm; or

    2. (b)

      a participant firm's specific costs levy in the financial year5 of the compensation scheme5 in which it had its permission extended, and the following financial year of the compensation scheme5; and

    3. (c)

      the tariff base for the classes3 that relate to the relevant permissions or extensions, as the case may be.

      3
  2. (2)

    Unless this rule says otherwise the tariff base is calculated, where necessary, using the projected valuation of the business to which the tariff relates.

  3. (3)

    The rest of this rule only applies to a firm that becomes a participant firm, or extends its permission, on or after 1 April 2009.

    1. (a)

      If a participant firm's tariff base is calculated using data from a period that begins on or after it became a participant firm or on or after the date that the participant firm receives its extension of permission, as the case may be, the participant firm must use that data.

    2. (b)

      If a participant firm satisfies the following conditions it must calculate its tariff base under (c) for the FSCS financial year5 following the financial year of the compensation scheme in which5 it became a participant firm:

      1. (i)

        it became a participant firm or receives its extension of permission, as the case may be, between 1 April and 31 December inclusive; and

      2. (ii)

        its tariff base, but for this rule, is calculated by reference to the financial year ended in the calendar year ending 31 December or the twelve months ending 31 December before the financial year of the compensation scheme5.

    3. (c)

      If a participant firm satisfies the conditions in (b) it must calculate its tariff base as follows:

      1. (i)

        it must use actual data in relation to the business to which the tariff relates rather than projected valuations;

      2. (ii)

        the tariff is calculated by reference to the period beginning on the date it became a participant firm or had its permission extended, and ending on the 31 December before the start of the financial year of the compensation scheme5; and

      3. (iii)

        the figures are annualised by increasing them by the same proportion as the period of 12 months bears to the period starting from when the participant firm became a participant firm or had its permission extended to the 31 December, as the case may be.

    4. (d)

      Where a participant firm is required to use the method in (c) it must notify the FSCS of its intention to do so by the date specified in FEES 6.5.13 R(Reporting Requirements).

    5. (e)

      Where a participant firm is required to use actual data under this rule,5 FEES 6 Annex 3AR5 is disapplied, to the extent it is incompatible, in relation to the calculation of that participant firm's valuation date in its second financial year.

2Application of FEES 6.4.10AR

FEES 6.4.10BGRP

The table below sets out the period within which a participant firm's tariff base is calculated ("the data period") for second year levies calculated under FEES 6.4.10AR5. The example is based on a participant firm that extends its permission on 1 November 2009 and has a financial year ending 31 March.

References in this table to dates or months are references to the latest one occurring before the start of the financial year of the compensation scheme5 unless otherwise stated.

Type of permission acquired on 1 November

Tariff base

Valuation date but for FEES 6.4.10AR5

Data period under FEES 6.4.10AR5

5

5

5

5

5

5

5

5

Dealing in investments as agent in relation to General Insurance Intermediation

Annual eligible income

Financial year ended 31 March 2009 - so projected valuations will be used.

1 November to 31 December 2009

FEES 6.4.11R

[deleted]1

1
FEES 6.4.12R

[deleted]1

1