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Status: You are viewing the version of the handbook as on 2009-03-31.

FEES 6.5 Compensation costs

FEES 6.5.1R

The compensation costs levy is made up of compensation costs incurred by the FSCS, together with any compensation costs which can reasonably be anticipated as arising in the 12 months following the levy date, and which in each case have not already been subject to a levy.

FEES 6.5.2R

4The FSCS must allocate any compensation costs levy to the sub-classes in proportion to the amount of compensation costs arising from, or expected to arise from, claims in respect of the different activities represented by those sub-classes up to the levy limit of each relevant sub-class and thereafter in the following order:

  1. (1)

    any excess must be allocated to the other sub-class in the same class up to the levy limit of that other sub-class (except in the deposit class, for which there is only one sub-class); and4any excess must be allocated to the other sub-class in the same class up to the levy limit of that other sub-class (except in the deposit class, for which there is only one sub-class); and4

    4
  2. (2)

    any excess above the levy limit of the class must be allocated to each other sub-class, other than the home finance provision sub-class E1, whose levy limit has not been reached (the 'general retail pool'), in proportion to the relative sizes of the levy limits of those remaining sub-classes in the general retail pool.4

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FEES 6.5.2AGRP

4The use made by FSCS of borrowing facilities to provide liquidity until the next levy does not affect the allocation of costs incurred or anticipated.

FEES 6.5.2BG

4The calculation of the relative sizes of the levy limits for the purpose of FEES 6.5.2R (2) (including any allocations caused by the exhaustion of a receiving sub-class) is based on the original levy limit for the sub-classes (as set out in FEES 6 Annex 2 R) and not the remaining capacity in each sub-class.

FEES 6.5.2CG

4When FSCS allocates excess compensation costs levies otherwise attributable to a class which has reached its levy limit, in accordance with FEES 6.5.2 R (2), a sub-class to which any excess has been allocated (the 'receiving sub-class') may, as a result of that allocation, itself reach its levy limit. In that case, the effect of FEES 6.5.2 R is that any resulting excess levy beyond the levy limit of the receiving sub-class is to be allocated amongst the remaining sub-classes whose levy limits have not been reached, to the exclusion of the receiving sub-class. This process is repeated until the compensation costs levy has been met in full or the general retail pool has been exhausted.

FEES 6.5.3RRP

If a participant firm which is in default has carried on a regulated activity other than in accordance with a permission, the FSCS must allocateany compensation costs or specific costs arising out of that activity to the relevant sub-class4 which covers that activity or if a levy limit of the relevant sub-class or class has been exceeded, FSCS must allocate any compensation costs levy on the same basis as set out in FEES 6.5.2 R4.

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FEES 6.5.4RRP

If the relevant person in default is an appointed representative, the FSCS must allocateany compensation costs or specific costs arising out of a regulated activity for which his principal has not accepted responsibility to the relevant sub-class4 for that activity or if a levy limit of the relevant sub-class or class has been exceeded, FSCS must allocate any compensation costs levy on the same basis as set out in FEES 6.5.2 R.4

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FEES 6.5.5RRP
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  1. (1)

    A participant firm must pay to the FSCS a share of each compensation costs levy unless either the firm is exempt under FEES 6.2 (Exemption) or the FSCS has chosen to exercise its discretion under FEES 6.3.23 R in respect of that firm.4

  2. (2)

    If a levy relates solely to costs allocated in excess of a particular levy limit (1) does not apply to a participant firm member of the sub-class or class whose levy limit has been exceeded.

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FEES 6.5.6R

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

4
  1. (1)

    identifying each of the sub-classes to which each participant firm belongs, using the statement of business most recently supplied under FEES 6.5.13 R (1);4

  2. (2)

    identifying the compensation costs falling within FEES 6.5.1 R allocated, in accordance with FEES 6.5.2 R, to the sub-classes identified in (1);4

  3. (3)

    calculating, in relation to each relevant sub-class, the participant firm's tariff base as a proportion of the total tariff base of all participant firms in the sub-class, using the statement of business most recently supplied under FEES 6.5.13 R;4

  4. (4)

    applying the proportion calculated in (3) to the figure in (2); and4

  5. (5)

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

Sub-classes and tariff bases for compensation cost levies and specific costs levies4

FEES 6.5.7R

When calculating a participant firm's share of a compensation costs levy or specific costs levy allocated toeach sub-class the FSCS must use the sub-classes and tariff bases as set out in the table in FEES 6 Annex 3 R.4

4
  1. (1)

    [deleted]4

  2. (2)

    [deleted]4

  3. (3)

    [deleted]4

  4. (4)

    [deleted]4

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  5. (5)

    [deleted]4

FEES 6.5.8GRP

Guidance on parts of FEES 6 Annex 3 R can be found in FEES 6 Annex 4 G.44

New participant firms4

FEES 6.5.9RRP

A firm which becomes a participant firm part way through a financial year of the compensation scheme will not be liable to pay a share of a compensation costs levy made in that year.4

Membership of several classes or sub-classes5

FEES 6.5.10R

[deleted]4

FEES 6.5.11R

[deleted]44

FEES 6.5.12G

A participant firm may belong to more than one class4, and more than one sub-class4 within the same class.4

444

Reporting requirements

FEES 6.5.13RRP
  1. (1)

    5Unless exempt under FEES 6.2.1 R, a participant firm must provide the FSCS by the end of February each year (or, if it has become a participant firm part way through the financial year, by the date requested by the FSA) with a statement of:4

    1. (a)

      sub-classes to which it belongs; and4

    2. (b)

      the total amount of business (measured in accordance with the appropriate tariff base or tariff bases) which it conducted, in respect of the most recent valuation period (as specified by FEES 6 Annex 3 R (Financial Services Compensation Scheme - classes and sub-classes)) ending before the relevant year in relation to each of those sub-classes.5

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  2. (2)

    In this rule the relevant year means the year in which the month of February referred to in (1) falls.4

  3. (3)

    This rule does not apply in relation to the home finance provision sub-class E1.4Therefore any reference in the Handbook to information that is or must be supplied under this rule must be read, in the case of sub-class E1, as if it referred to the corresponding provisions relating to FSA periodic fees.5

FEES 6.5.13AGRP

For example, when the tariff base for a particular sub-class is based on a firm's annual eligible income the valuation period for that sub-class is the firm's last financial year ending in the year to 31 December preceding the financial year of the FSCS for which the calculation is being made. In the case of a firm in sub-class A1 (Deposits) its valuation period will be 31 December.5

FEES 6.5.14RRP

If the information in FEES 6.5.13 R has been provided to the FSA under other rule obligations, a participant firm will be deemed to have complied with FEES 6.5.13 R.

FEES 6.5.15R

Where a participant firm can identify that a protected deposit was made by a person who is not an eligible claimant, it may exclude the amount of that deposit from the tariff base, provided that it notifies the FSCS of the amount of the deposit so excluded and provides the FSCS with such information about the deposit as the FSCS may reasonably require.

FEES 6.5.16RRP

If a participant firm does not submit a complete statement by the date on which it is due in accordance with FEES 6.5.13 R and any prescribed submission procedures:

  1. (1)

    the firm must pay an administrative fee of £250 (but not if it is already subject to an administrative fee under FEES 4 Annex 2 Part 1 or FEES 5.4.1 R for the same financial year); and

  2. (2)

    the compensation costs levy and any specific costs levy will be calculated using (where relevant) the valuation or valuations of business applicable to the previous period, multiplied by the factor of 1.10 (or, if it has become a participant firm part way through a financial year, on the basis of the information provided to the FSA for the purposes of FEES 4.4.2 R) or on any other reasonable basis, making such adjustments as seem appropriate in subsequent levies once the true figures are known.

4
FEES 6.5.17R

[deleted]4

4