FEES 6
Financial Services Compensation Scheme Funding
FEES 6.1
Application
- 01/01/2006
FEES 6.1.1
See Notes
- 01/01/2006
FEES 6.1.2
See Notes
(1) Firms which are not participant firms (such as certain types of incoming EEA firms, service companies and ICVCs) are not required to contribute towards the funding of the compensation scheme.
(2) Although a member is a participant firm for the purposes of most provisions of COMP, a member is excluded from the definition of participant firm for the purposes of FEES 6 (see definition of participant firm in Glossary). This is because the fees levied in relation to the carrying on of insurance market activities by members will be imposed on Society rather than individually on each member (see FEES 6.3.24 R).
- 01/01/2006
Purpose
FEES 6.1.3
See Notes
The purpose of this chapter is to set out the requirements on participant firms to pay levies imposed by the FSCS to provide funding for its functions.
- 01/01/2006
General structure
FEES 6.1.4
See Notes
Section 213(3)(b) of the Act requires the
FSA
to make rules to enable the FSCS to impose levies on authorised persons in order to meet its expenses. These expenses include in particular expenses incurred, or expected to be incurred, in paying compensation, borrowing or insuring risks.
- 01/01/2006
FEES 6.1.5
See Notes
The FSCS may impose two types of levy: a management expenses levy, and a compensation costs levy. In the first three full years of the operation of the compensation scheme, the FSCS may impose an establishment costs levy as part of a management expenses levy. The FSCS has discretion as to the timing of the levies imposed.
- 01/01/2006
FEES 6.1.6
See Notes
In calculating a compensation costs levy, the FSCS may include anticipated compensation costs for defaults expected to be determined in the 12-month period following the date of the levy. The total of all management expenses levies attributable to a financial year will be restricted to the amount set out on an annual basis in FEES 6 Annex 1.
- 01/01/2006
FEES 6.1.7
See Notes
In order to allocate a share of the amount to be funded by an individual participant firm, the funding arrangements are split into five sub-schemes: the accepting deposits sub-scheme; the insurance business sub-scheme; the designated investment business sub-scheme; the mortgage advice and arranging sub-scheme and the general insurance mediation sub-scheme. The business carried on by a participant firm determines into which sub-scheme, or sub-schemes, it falls.
- 01/01/2006
FEES 6.1.8
See Notes
Within each sub-scheme there are one or more contribution groups These relate to different types of activity carried on by participant firms within each sub-scheme Within a sub-scheme individual participant firms are allocated for funding purposes to one or more contribution groups, depending on their business activities. This meets a requirement of section 213(5) of the Act that the FSA, in making rules to enable the FSCS to impose levies, must take account of the desirability of ensuring that the amount of the levies imposed on a particular class of authorised person reflects, so far as practicable, the amount of claims made, or likely to be made, in respect of that class of person.
- 01/01/2006
The management expenses levy
FEES 6.1.9
See Notes
Section 223 of the Act (Management expenses) prevents the FSCS from recovering, through a levy, any management expenses attributable to a particular period in excess of the limit set in COMP as applicable to that period. 'Management expenses' are defined in section 223(3) to mean expenses incurred or expected to be incurred by the FSCS in connection with its functions under the Act, except:
(1) expenses incurred in paying compensation; and
(2) expenses incurred as a result of the FSCS making the arrangements to secure continuity of insurance set out in COMP 3.3.1 R and COMP 3.3.2 R or taking the measures set out in COMP 3.3.3 R and COMP 3.3.4 R when a relevant person is an insurer in financial difficulties.
- 01/01/2006
FEES 6.1.10
See Notes
A management expenses levy under COMP may consist of three elements. The first is a base costs levy, for the base costs of running the compensation scheme in a financial year, that is, costs which are not dependent upon the level of activity of the compensation scheme and which therefore are not referable to any specific default. Included in this category are items such as the salary of the members of the board of the FSCS, the costs of the premises which the FSCS occupies, and its audit fees. The amount that each participant firm pays towards a base costs levy is calculated by reference to the regulatory costs paid by the firm. All participant firms are liable to contribute towards a base costs levy.
- 01/01/2006
FEES 6.1.11
See Notes
The second element of a management expenses levy is a specific costs levy for the "specific costs" of running the compensation scheme in a financial year. These costs depend on the number of claims and types of default, and include the salaries of the staff of the FSCS and legal and other professional fees paid in respect of particular defaults. The specific costs are allocated to the contribution group or groups of which the relevant person in default was a member, or which is responsible for those costs under COMP, on the basis of the protected claims against that person. The FSCS may include in a specific costs levy the specific costs that the FSCS expects to incur (including in respect of defaults not yet declared at the date of the levy) during the financial year of the compensation scheme to which the levy relates. The amount that each participant firm pays towards the specific costs levy is calculated by reference to the amount of business conducted by the firm in each of the contribution groups to which the FSCS has allocated specific costs. Each contribution group has a separate "tariff base" for this purpose, set out in FEES 6.5.8 G to FEES 6.5.11 R. Participant firms may be exempt from contributing to the specific costs levy.
- 01/01/2006
FEES 6.1.12
See Notes
The third element of a management expenses levy is the costs of establishing the FSCS. The FSCS may impose an establishment costs levy only until the end of the third full financial year of operation of the compensation scheme. The amount that each participant firm pays towards the establishment costs levy is calculated on the same basis as the base costs levy, and all participant firms are liable to contribute.
- 01/01/2006
FEES 6.1.13
See Notes
The FSA intends to consult in January each year on the amount which it will set as the limit on the management expenses attributable to the forthcoming financial year of the FSCS.
- 01/01/2006
The compensation costs levy
FEES 6.1.14
See Notes
The compensation costs levy is made up of the compensation costs which the FSCS has incurred and has not yet recovered from participant firms (less any recoveries it has made using the rights that have been assigned to it), together with those compensation costs it expects to incur (including in respect of defaults yet to be declared) over the 12 months following the date of the levy.
- 01/01/2006
FEES 6.1.15
See Notes
Compensation costs are principally the costs incurred in paying compensation. Costs incurred in securing continuity of long-term insurance in safeguarding eligible claimants when insurers are in financial difficulties, and in making payments or giving indemnities under COMP 11.2.3 R are also treated as compensation costs. For funding purposes, these costs are allocated by the FSCS, and met by participant firms, in the same way as specific costs: see FEES 6.5.6 R.
- 01/01/2006
FEES 6.1.16
See Notes
If a participant firm is a member of more than one contribution group, the total compensation costs levy and specific costs levy for that firm will be the aggregate of the individual levies calculated for the firm in respect of each of the contribution groups.
- 01/01/2006
Incoming EEA firms
FEES 6.1.17
See Notes
Incoming EEA firms which obtain cover or 'top up' under the provisions of COMP 14 are firms whose Home State scheme provides no or limited compensation cover in the event that they are determined to be in default. Under FEES 6.6, the FSCS is required to consider whether incoming EEA firm's should receive a discount on the amount that they would otherwise pay as their share of the levy, to take account of the availability of their Home State cover. The amount of any discount is recoverable from the other members of the incoming EEA firm's
contribution group
- 01/01/2006
FEES 6.2
Exemption
- 01/01/2006
FEES 6.2.1
See Notes
(1) A participant firm which does not conduct business that could give rise to a protected claim by an eligible claimant and has no reasonable likelihood of doing so is exempt from a specific costs levy, or a compensation costs levy, or both, provided that:
(a) it has notified the FSCS in writing that those conditions apply; and
(b) the conditions in fact continue to apply.
(2) The exemption takes effect from the date on which the notice was received by the FSCS, subject to FEES 6.2.6 R.
- 01/01/2006
FEES 6.2.2
See Notes
FEES 6.2.1 R does not apply to a participant firm that may be subject to a claim under COMP 3.2.4 R.
- 01/01/2006
FEES 6.2.3
See Notes
A participant firm to which FEES 6.2.2 R applies must report annual eligible income in accordance with FEES 6.5.13 R. Such a participant firm may take advantage of the option to report its annual income attributable to business conducted with or on behalf of eligible claimants.
- 01/01/2006
FEES 6.2.4
See Notes
A participant firm which is exempt under FEES 6.2.1 R must notify the FSCS in writing as soon as reasonably practicable if the conditions in FEES 6.2.1 R no longer apply.
- 01/01/2006
FEES 6.2.5
See Notes
A participant firm to which the conditions in FEES 6.2.1 R no longer apply will then become subject to FEES 6.3.
- 01/01/2006
FEES 6.2.6
See Notes
If a participant firm ceases to conduct business that could give rise to a protected claim by an eligible claimant and notifies the FSCS of this under FEES 6.2.1R (1), it will be treated as a participant firm to which FEES 6.7.6 R applies until the end of the financial year of the compensation scheme in which the notice was given.
- 01/01/2006
FEES 6.2.7
See Notes
The financial year of the compensation scheme is the twelve months ending on 31 March.
- 01/01/2006
FEES 6.2.8
See Notes
For the purposes of FEES 6.2.1 R a participant firm will only be exempt from a specific costs levy or compensation costs levy for any given financial year if it met the conditions in FEES 6.2.1 R on 31 March of the immediately preceding financial year.
- 01/04/2007
FEES 6.3
The FSCS's power to impose levies
- 01/01/2006
General limits on levies
FEES 6.3.1
See Notes
The FSCS may at any time impose a management expenses levy or a compensation costs levy, provided that the FSCS has reasonable grounds for believing that the funds available to it to meet relevant expenses are, or will be, insufficient, taking into account:
(1) in the case of a management expenses levy, the level of the FSCS's anticipated expenditure in respect of those expenses in the financial year of the compensation scheme in relation to which the levy is imposed; and
(2) in the case of a compensation costs levy, the level of the FSCS's anticipated expenditure in respect of compensation costs in the 12 months following the levy.
- 01/01/2006
FEES 6.3.2
See Notes
The calculation of levies will also take into account previous levies, where funds raised in anticipation of meeting liabilities prove either more or less than the amount actually required.
- 01/01/2006
FEES 6.3.3
See Notes
The FSCS may impose one or more levies in a financial year to meet either its management expenses or its compensation costs. The FSCS may also impose interim levies, as part of its overall levy commitment. This flexibility allows the FSCS to phase its financing over the course of a financial year and thus avoid collecting levies from firms before the money is actually needed. The FSCS has committed itself in the Memorandum of Understanding with the FSA (the text of which can be found on the FSA website www.fsa.gov.uk) to publish regularly an indicative timetable for its levy procedures.
- 01/01/2006
FEES 6.3.4
See Notes
- 01/01/2006
Limits on compensation costs levies on sub-schemes
FEES 6.3.5
See Notes
The FSCS must not require a participant firm in the accepting deposits sub-scheme to pay a share of a compensation costs levy allocated to that sub-scheme to the extent that:
(1) the share in question; plus
(2) all previous amounts paid by the firm either as its share of levies allocated to that sub-scheme, or under the Deposit Protection Scheme (deducting from those amounts any amount refunded under FEES 6.3.20 R to FEES 6.3.21 R or by the Deposit Protection Scheme);
amounts to more than 0.3% of the firm's protected deposits.
- 01/01/2006
FEES 6.3.6
See Notes
The FSCS must not require a participant firm in the insurance business sub-scheme to pay a share of a compensation costs levy allocated to that sub-scheme in any financial year of the compensation scheme, to the extent that the share in question, together with all previous amounts paid by the firm as its share of compensation costs levies allocated to that sub-scheme in that financial year, amounts to more than 0.8% of the participant firm's relevant net premium income.
- 01/01/2006
FEES 6.3.7
See Notes
The maximum amount of compensation costs for which the FSCS can levy the designated investment business sub-scheme in any one financial year of the compensation scheme is limited to 400 million.
- 01/01/2006
FEES 6.3.8
See Notes
The FSCS must not require a participant firm in the home finance advice and arranging sub-scheme to pay a share of a compensation costs levy allocated to that sub-scheme in any financial year of the compensation scheme, to the extent that:
(1) the share in question; plus
(2) all previous amounts paid by the firm as its share of compensation costs levies allocated to that sub-scheme in that financial year;
amounts to more than 0.8% of the participant firm's annual eligible income.
- 06/04/2007
FEES 6.3.9
See Notes
The FSCS must not require a participant firm in the general insurance mediation sub-scheme to pay a share of a compensation costs levy allocated to that sub-scheme in any financial year of the compensation scheme, to the extent that:
(1) the share in question; plus
(2) all previous amounts paid by the firm as its share of the compensation costs levy allocated to that sub-scheme in that financial year;
amounts to more than 0.8% of the participant firm's annual eligible income.- 01/01/2006
Levy for compensation costs paid in error
FEES 6.3.10
See Notes
The FSCS may include in a compensation costs levy the costs of compensation paid by the FSCS in error, provided that the payment was made in good faith.
- 01/01/2006
Management of funds
FEES 6.3.11
See Notes
The FSCS must hold any amount collected from a specific costs levy or compensation costs levy to the credit of the sub-schemes and relevant contribution groups, in accordance with the allocation established under FEES 6.4.6 R and FEES 6.5.2 R.
- 01/01/2006
FEES 6.3.12
See Notes
Any funds received by the FSCS by way of levy or otherwise for the purposes of the compensation scheme are to be managed as the FSCS considers appropriate, and in doing this the FSCS must act prudently.
- 01/01/2006
FEES 6.3.13
See Notes
Interest earned by the FSCS in the management of funds held to the credit of a contribution group must be credited to that contribution group, and must be set off against the management expenses allocated to that contribution group.
- 01/01/2006
FEES 6.3.14
See Notes
The FSCS must keep accounts which show:
- 01/01/2006
FEES 6.3.15
See Notes
The FSCS may use the money collected from firms within one sub-scheme to pay compensation costs in respect of any contribution group within that sub-scheme, so long as it ensures that this is done without prejudice to the participant firms from whom the money has been collected.
- 01/01/2006
FEES 6.3.16
See Notes
FEES 6.3.15 R means that, for example:
(1) when crediting interest under FEES 6.3.13 R, the FSCS should regard any money collected from one
contribution group
which has been used to pay the compensation costs of another
contribution group
within the same as standing to the credit of the first
contribution group; and
(2) the FSCS should not raise a levy under FEES 6.3.1 R on a
contribution group
solely because, as a result of the FSCS's action under FEES 6.3.15 R, there appear to be insufficient funds available to the credit of the
contribution group
to meet its expenses.
- 01/01/2006
FEES 6.3.17
See Notes
(1) The FSCS may use any money held to the credit of one sub-scheme (the creditor sub-scheme) to pay compensation costs in respect of or allocated to another sub-scheme (the debtor sub-scheme if the FSCS has reasonable grounds to believe that this would be more economical than borrowing funds from a third party or raising a levy.
(2) Where the FSCS acts in accordance with (1), it must ensure that:
(a) the creditor sub-scheme is reimbursed by the debtor sub-scheme as soon as possible;
(b) the debtor sub-scheme pays interest at a rate equivalent to the Bank of England's repo rate from time to time in force; and
(c) the amount lent by the creditor sub-scheme to the debtor sub-scheme is taken into account by the FSCS when considering whether to impose a compensation costs levy on the creditor sub-scheme under FEES 6.3.1 R.
- 01/04/2007
FEES 6.3.18
See Notes
(1) The FSCS may use any money held to the credit of any sub-scheme to repay borrowing from a third party incurred to pay establishment costs, if in the opinion of the FSCS this would be to the benefit of participant firms.
(2) Where the FSCS acts in accordance with (1), it must ensure that:
(a) future establishment costs levies are used first to repay all amounts borrowed from the appropriate sub-schemes;
(b) interest is paid to the appropriate sub-schemes at a rate equivalent to the Bank of England's repo rate from time to time in force; and
(c) the amount lent by any sub-scheme is taken into account by the FSCS when considering whether to impose a levy under FEES 6.3.1 R.
- 01/01/2006
FEES 6.3.19
See Notes
Unless FEES 6.3.20 R applies, any recoveries made by the FSCS in relation to protected claims must be credited to the contribution groups to which the related compensation costs were allocated.
- 01/01/2006
FEES 6.3.20
See Notes
If the FSCS makes recoveries in relation to protected claims where the related compensation costs were allocated to the accepting deposits sub-scheme, or in relation to compensation paid out of a special contribution under the Deposit Protection Scheme, and if the FSCS refunds the recoveries under FEES 6.3.21 R, it must ensure that, as far as possible, the recoveries are refunded to the firms that contributed to the relevant compensation costs levy or special contribution (whether or not the firms are participant firms at the time that the recoveries are made).
- 01/01/2006
FEES 6.3.21
See Notes
If the FSCS has more funds to the credit of a contribution group than the FSCS believes will be required to meet levies on that contribution group for the next 12 months, it may refund the surplus to members or former members of the contribution group on any reasonable basis.
- 01/01/2006
Adjustments to calculation of levy shares
FEES 6.3.22
See Notes
The FSCS may adjust the calculation of a participant firm's share of any levy to take proper account of:
(1) any excess, not already taken into account, between previous levies of that type imposed in relation to previous periods and the relevant costs actually incurred in that period; or
(2) participant firms that are exempt from the levy under FEES 6.2; or
(3) amounts that the FSCS has not been able to recover from participant firms as a result of FEES 6.3.5 R FEES 6.3.6 R, FEES 6.3.8 R or FEES 6.3.9 R; or
(4) amounts that the FSCS has not been able to recover from participant firms after having taken reasonable steps; or
(5) FEES 6.4.8 R (New participant firms), FEES 6.3.23 R (Remission of levy or additional administrative fee) or FEES 6.6 (Incoming EEA firms); or
(6) anything else that the FSCS believes on reasonable grounds should be taken into account.
- 01/01/2006
Remission of levy or additional administrative fee
FEES 6.3.23
See Notes
If a participant firm's share of a levy or an additional administrative fee under FEES 6.7.4 R would be so small that, in the opinion of the FSCS, the costs of collection would be disproportionate to the amount payable, the FSCS may treat the participant firm as if its share of the levy or additional administrative fee amounted to zero.
- 01/01/2006
Levies on the Society of Lloyd's
FEES 6.3.24
See Notes
The FSCS may impose a levy on the Society to be calculated as the aggregate of the levies that would be imposed on each member if this chapter applied to members, as follows:
(1) a share of any unexpired portion of an establishment costs levy;
(2) a proportionate share of a base costs levy in respect of the compensation scheme's costs for the period from 1 January 2004 to the end of the compensation scheme's financial year and a share of such levies for all subsequent financial years; and
(3) a specific costs levy and a compensation costs levy in respect of costs arising out of a relevant person being in default, arrangements made under COMP 3.3.1 R or measures taken under COMP 3.3.3 R where:
on or after 1 January 2004.(a) the default occurs or the circumstances giving rise to the arrangements being made or the measures being taken, as the case may be, occur; and
(b) the protected contracts of insurance in connection with which the costs arise were entered into;
- 01/01/2006
FEES 6.4
Management expenses
- 01/01/2006
Obligation on participant firm to pay
FEES 6.4.1
See Notes
- 01/01/2006
Limit on management expenses
FEES 6.4.2
See Notes
The total of all management expenses levies 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.
- 01/01/2006
Participant firm's share
FEES 6.4.3
See Notes
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; and (3) a share of an establishment costs levy.
- 01/01/2006
FEES 6.4.4
See Notes
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,
specific costs levy
and establishment costs levy.
- 01/01/2006
Base costs levy
FEES 6.4.5
See Notes
Unless FEES 6.3.22 R applies, the FSCS must calculate a participant firm's share of a base costs levy by:
- (1) identifying the base costs which the FSCS has incurred, or expects to incur, in the relevant financial year of the compensation scheme, but has not yet levied;
- (2) calculating the amount of the participant firm's regulatory costs as a proportion of the total regulatory costs relating to all participant firms for the relevant financial year; and
- (3) applying the proportion calculated in (2) to the figure in (1).
- 01/01/2006
Specific costs levy
FEES 6.4.6
See Notes
(1) The FSCS must (subject to (2)) allocate any specific costs levy amongst the sub-schemes and relevant contribution groups in proportion to the volume of relevant costs arising from, or expected to arise from, claims in respect of the different activities represented by those contribution groups.
(2) The FSCS must allocate any part of a specific costs levy that relates to IFA pensions review claims in accordance with FEES 6.5.17 R (IFA pensions review compensation levies).
- 01/01/2006
FEES 6.4.7
See Notes
The 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) and FEES 6.5.17 R (IFA pensions review compensation levies)) by:
(1) identifying each of the sub-schemes and relevant contribution groups within those sub-schemes to which the participant firm belongs, using the statement of business most recently supplied under FEES 6.5.13 R;
(2) identifying the management expenses other than base costs or establishment costs which the FSCS has incurred, or expects to incur, in the relevant financial year of the compensation scheme, allocated to the contribution groups identified in (1), but not yet levied;
(3) calculating, in relation to each relevant contribution group FF, the participant firm's tariff base as a proportion of the total tariff base of all participant firms in the contribution group, using the statement of business most recently supplied under FEES 6.5.13 R;
(4) applying the proportion calculated in (3) to the figure in (2); and
(5) if more than one sub-scheme or contribution group is relevant, adding together the figure in (4) for each contribution group.
- 01/01/2006
New participant firms
FEES 6.4.8
See Notes
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 specific costs levy made in that year.
- 01/01/2006
FEES 6.4.9
See Notes
New participant firms will normally have relevant tariff bases of nil as at 31 December in the financial year preceding that in which they join, so that they will not be required to pay a share of a specific costs levy (or a compensation costs levy because of FEES 6.5.6 R). FEES 6.4.8 R means that the FSCS does not have to estimate the tariff base of a new participant firm.
- 01/01/2006
FEES 6.4.10
See Notes
Since a firm that becomes a participant firm in the course of a financial year of the compensation scheme will already be obtaining a discount in relation to the base costs levy and the establishment costs levy through the modified fee provisions of FEES 4.2.6 R, no rule is necessary in COMP for discounts on the base costs levy or the establishment costs levy.
- 01/01/2006
FEES 6.4.11
See Notes
The FSCS must calculate a participant firm's share of an establishment costs levy on the same basis as a base costs levy under FEES 6.4.5 R.
- 01/01/2006
FEES 6.4.12
See Notes
The FSCS may not impose an establishment costs levy after the end of the third full financial year of operation of the compensation scheme.
- 01/01/2006
FEES 6.5
Compensation costs
- 01/01/2006
FEES 6.5.1
See Notes
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.
- 01/01/2006
FEES 6.5.2
See Notes
- (1) The FSCS must (subject to (2)) allocate any compensation costs levy to the individual sub-schemes and relevant contribution groups in proportion to the volume of compensation costs arising from, or expected to arise from, claims in respect of the different activities represented by those contribution groups.
- (2) The FSCS must allocate any part of a compensation costs levy that relates to IFA pensions review claims in accordance with FEES 6.5.17 R (IFA pensions review compensation levies).
- 01/01/2006
FEES 6.5.3
See Notes
If a participant firm which is in default has carried on a regulated activity other than in accordance with a permission, the FSCS must allocate any compensation costs or specific costs arising out of that activity to the relevant contribution group which covers that activity.
- 01/01/2006
FEES 6.5.4
See Notes
If the relevant person in default is an appointed representative, the FSCS must allocate any compensation costs or specific costs arising out of a regulated activity for which his principal has not accepted responsibility to the relevant contribution group for that activity
- 01/01/2006
FEES 6.5.5
See Notes
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.
- 01/01/2006
FEES 6.5.6
See Notes
The FSCS must calculate a participant firm's share of a compensation costs levy (subject to FEES 6.5.17 R (IFA pensions review compensation levies)) on the same basis as a specific costs levy under FEES 6.4.6 R, FEES 6.4.7 R and FEES 6.4.8 R.
- 01/01/2006
FEES 6.5.7
See Notes
When calculating a participant firm's share of a compensation costs levy or specific costs levy allocated to:
(1) the accepting deposits sub-scheme or the insurance business sub-scheme, the FSCS must use the contribution groups and tariff bases as set out in the table in FEES 6.5.8 G;
(2) the investment business sub-scheme, the FSCS must (unless (3) applies) use as the contribution groups and tariff bases the correspondingly numbered activity groups and tariff bases set out in part 1 and part 2 of FEES 4 Ann 1 which are identified in FEES 6.5.9 R;
(3) the investment business sub-scheme, where any part of the levy relates to IFA pensions review claims, the FSCS must comply with FEES 6.5.17 R (IFA pensions review compensation levies);
(4) the home finance advice and arranging sub-scheme, the FSCS must use the contribution group and tariff base set out in the table in FEES 6.5.10 R;
(5) the general insurance mediation sub-scheme, the FSCS must use the contribution group and tariff base set out in the table in FEES 6.5.11 R.
- 06/04/2007
FEES 6.5.8
See Notes
Contribution Groups for the Accepting Deposits Sub-scheme and the Insurance Business Sub-scheme for the Financial Services Compensation Scheme (see FEES 6.5.7R (1))
| Accepting deposits | A1 - deposit takers | Accepting deposits (article 5) | Protected deposits (see FEES 6.5.15 R) |
| Insurance business | A3 - Insurance activities - General insurance | Effecting contracts of insurance and/or carrying out contracts of insurance (article 10) that are general insurance contracts | Relevant net premium income |
| Insurance business | A4 - insurance activities - Life Insurance | Effecting contracts of insurance and/or carrying out contracts of insurance (article 10) that are long-term insurance contracts | Relevant net premium income |
- 02/03/2008
FEES 6.5.9
See Notes
The contribution groups and tariff bases for the investment business sub-scheme (see FEES 6.5.7R (2)). (The contribution groups, legal bases for activity and tariff bases are the same as the correspondingly numbered activity groups and tariff bases set out in Part 1 and Part 2 of FEES 4 Ann 1R, to the extent that they are covered by the scope of the FSCS.)
| SUB-SCHEME | CONTRIBUTION GROUP (references to A7 etc are to the activity groups in part 1 of FEES 4 Ann 1R) | LEGAL BASIS FOR ACTIVITY (this is merely a summary of the basis in part 1 of FEES 4 Ann 1R; references to articles are to articles of the Regulated Activities Order) | TARIFF BASE (this is merely a summary of the base in part 2 of FEES 4 Ann 1R) |
| Designated investment business | A7 - fund managers | Managing investments (article 37) | Funds under management |
| Designated investment business | A9 - managers of an AUT, ACDs and depositaries and operators of personal pension schemes or stakeholder pension schemes | Any of the following: (a) establishing, operating or winding up a collective investment scheme; (b) acting as a trustee of an authorised unit trust scheme; (c) acting as a depositary, or sole director of an open-ended investment company (article 51); (d) establishing, operating or winding up a personal pension scheme or a stakeholder pension scheme. | Gross income |
| Designated investment business | A10 - dealing as principal | Dealing in investments as principal (article 14). | Number of traders |
| Designated investment business | A12 - advisory brokers (excluding corporate finance advisers) - holding either client money or assets | Any of the following: (a) dealing in investments as agent (article 21); (b) arranging (bringing about) deals in investments (article 25(1)); (c) making arrangements with a view to transactions in investments (article 25(2)); with permission to: (i) advise on investments (article 53); (ii) hold client money; and (iii) safeguarding and administering investments (article 40) | Number of approved persons |
| Designated investment business | A13 - advisory brokers (excluding corporate finance adviser) - not holding either client money or assets | Any of the following: (a) dealing in investments as agent (article 21); (b) arranging (bringing about) deals in investments (article 25(1)); (c) making arrangements with a view to transactions in investments (article 25(2)); with permission to advise on investments (article 53); but not to (i) hold client money; and (ii) safeguard and administer investments (article 40). | Number of approved persons |
| Designated investment business | A14 - corporate finance advisory firms | Permission includes a requirement that the firm must not conduct designated investment business other than corporate finance business | Number of approved persons |
- 01/04/2007
FEES 6.5.10
See Notes
The contribution groups and tariff bases for the home finance advisers and arrangers (see FEES 6.5.7R (4))
| SUB-SCHEME | CONTRIBUTION GROUP (REFERENCES TO A1, A2 ETC ARE TO THE FSA FEE BLOCKS) | LEGAL BASIS FOR ACTIVITY (references to articles are to articles of the Regulated Activities Order) | TARIFF BASE |
| Home finance advice and arranging | A18 Home finance providers, advisers and arrangers | Any of the following: (a) arranging (bringing about) a home finance transaction; (b) making arrangements with a view to a home finance transaction; (c) advising on a home finance transaction; (d) agreeing to carry on a regulated activity which is within any of the above; and (e) the activities of a home finance provider which would be arranging but for article 28A of the Regulated Activities Order (Arranging contracts or plans to which the arranger is a party) | annual eligible income |
- 06/04/2007
FEES 6.5.11
See Notes
The contribution groups and tariff bases for the general insurance intermediaries (see FEES 6.5.7R (5))
| SUB-SCHEME | CONTRIBUTION GROUP (REFERENCES TO A1, A2 ETC ARE TO THE FSA FEE BLOCKS) | LEGAL BASIS FOR ACTIVITY (references to articles are to articles of the Regulated Activities Order) | TARIFF BASE |
| General insurance mediation | A.19 General insurance mediation | Any of the following in relation to a non-investment insurance contract: (a) dealing in investments as agent; (b) arranging (bringing about) deals in investments; (c) making arrangements with a view to transactions in investments; (d) assisting in the administration and performance of a contract of insurance; (e) advising on investments; and (f) agreeing to carry on a regulated activity which is within any of the above | annual eligible income |
- 01/01/2006
FEES 6.5.12
See Notes
A participant firm may belong to more than one
sub-scheme,, and more than one
contribution group
within the same
sub-scheme.
- 01/01/2006
FEES 6.5.13
See Notes
(1) Unless 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:
(a) sub-classes to which it belongs; and
(b) the total amount of business (measured in accordance with the appropriate tariff base or tariff bases) which it conducted, in respect of the firm's last financial year ended in the year to 31 December preceding the relevant year, or if appropriate to the tariff base, as at 31 December of the year immediately preceding the relevant year in relation to each of those sub-classes.
(2) In this rule the relevant year means the year in which the month of February referred to in (1) falls.
- 06/11/2007
FEES 6.5.14
See Notes
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.
- 01/01/2006
FEES 6.5.15
See Notes
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.
- 01/01/2006
FEES 6.5.16
See Notes
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) 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) 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.
- 01/01/2006
IFA pensions review compensation levies
FEES 6.5.17
See Notes
The FSCS must allocate any part of a specific costs levy or compensation costs levy that relates to IFA pensions review claims:
(1) to participant firms which were liable to pay the PIA pensions review compensation costs levy in 2001/2002; and
(2) in the same percentage share as that levy (adjusted to distribute the share of any previous contributor, which is not a participant firm, among remaining participant firms in accordance with their percentage shares).
- 01/01/2006
FEES 6.6
Incoming EEA firms
- 01/01/2006
FEES 6.6.1
See Notes
If an incoming EEA firm, which is a BCD credit institution, an IMD insurance intermediary or MiFID investment firm, is a participant firm, the FSCS must give the firm such discount (if any) as is appropriate on the share of any levy it would otherwise be required to pay, taking account of the nature of the levy and the extent of the compensation coverage provided by the firm's Home State scheme.
- 01/11/2007
FEES 6.7
Payment of levies
- 01/01/2006
FEES 6.7.1
See Notes
A participant firm must pay its share of any levy made by the FSCS:
(1) in one payment; or
(2) where the FSCS agrees, quarterly, at the beginning of each quarter, by direct debit agreement.
- 01/01/2006
FEES 6.7.2
See Notes
The amount paid under a direct debit arrangement will be adjusted on a continuous basis to take account of interim levies and other adjustments made during the course of the financial year.
- 01/01/2006
FEES 6.7.3
See Notes
A participant firm's share of a levy to which FEES 6.7.1R (1) applies is due on, and payable within 30 days of, the date when the invoice is issued.
- 01/01/2006
FEES 6.7.4
See Notes
If a participant firm does not pay its share of a levy subject to a direct debit agreement as required by FEES 6.7.1R (2), the entire amount of the levy becomes due and payable to the FSCS, and additional administrative fees are payable at the rate set out in FEES 2.2.1 R.
- 01/01/2006
FEES 6.7.5
See Notes
A participant firm liable to pay its share of the levy under FEES 6.7.1 R must do so using one of the methods set out in FEES 4.2.4 R save that no additional amount or discount is applicable.
- 01/01/2006
FEES 6.7.6
See Notes
If a firm ceases to be a participant firm part way through a financial year of the compensation scheme:
(2) the FSCS may make a levy upon it (which may be before or after the firm has ceased to be a participant firm, but must be before it ceases to be an authorised person) for the costs which it would have been liable to pay had the FSCS made a levy on all participant firms at the time of the levy on the firm;.
- 01/01/2006
FEES 6 Annex 1
Financial Services Compensation Scheme - Management Expenses Levy Limit
- 01/04/2006
See Notes
| This table belongs to FEES 6.4.2 R | |
| Period | Limit on total of all management expenses levies attributable to that period (£) |
| 1 December 2001 to 1 April 2002 | £4,209,000 |
| 1 April 2002 to 31 March 2003 | £13,228,000 |
| 1 April 2003 to 31 March 2004 | £13,319,000 |
| 1 April 2004 to 31 March 2005 | £17,590,000 |
| 1 April 2005 to 31 March 2006 | £27,030,000 |
| 1 April 2006 to 31 March 2007 | £37,060,000 |
| 1 April 2007 to 31 March 2008 | £37,520,000 |
- 01/04/2007
FEES 6 Annex 2
Financial Services Compensation Scheme - annual levy limits
- 06/11/2007
See Notes
This table belongs to FEES 6.3.5 R and FEES TP 2.5.2R
| Class | Sub-class | Levy Limit (£ million) |
| Deposit | ||
| Deposit | 1,840 | |
| Life and Pensions | ||
| Life and Pensions Provision | 690 | |
| Life and Pensions Intermediation | 100 | |
| General insurance | ||
| General Insurance Provision | 775 | |
| General Insurance Intermediation | 195 | |
| Investment | ||
| Fund management | 270 | |
| Investment Intermediation | 100 | |
| Home Finance | ||
| Home Finance Provision | 70 | |
| Home Finance Intermediation | 60 |
- 06/11/2007
FEES 6 Annex 3
Financial Services Compensation Scheme - classes and sub-classes
- 06/11/2007
See Notes
This table belongs to FEES 6.5.7 R and FEES TP 2.5.2R
| Class A | Deposit |
| Legal basis for activity in class A | accepting deposits. BUT does not include any fee payer who either effects or carries out contracts of insurance. |
| Tariff base | Protected deposits as at 31 December |
| Class B | General Insurance |
| Sub-class B1 | General Insurance Provision |
| Legal basis for activity in sub-class B1 |
effecting contracts of insurance; and/or
|
| that are general insurance contracts. | |
| Sub-class B2 | General Insurance Intermediation |
| Legal basis for activity in sub-class B2 | Any of the following in respect of general insurance contracts: |
|
agreeing to carry on a regulated activity which is within any of the above.
|
|
| Tariff base | Sub-class B1: Relevant net premium income. |
| Sub-class B2: annual eligible income where the annual income is calculated in accordance with that for fee-block A19 in part 2 of FEES 4 Annex 1. |
| Class C | Life and Pensions |
| Sub-class C1 | Life and Pensions Provision |
| Legal basis for activity in sub-class C1 |
effecting contracts of insurance; and/or
|
| that are long-term insurance contract (including pure protection contracts). | |
| Sub-class C2 | Life and Pensions Intermediation |
| Legal basis for activity in sub-class C2 | Any of the following: |
|
giving basic advice on a stakeholder product.
|
|
|
agreeing to carry on a regulated activity which is within any of the above;
|
|
| in relation to any of the following: | |
|
long term insurance contract (including pure protection contracts);
|
|
|
rights under a stakeholder pension scheme or a personal pension scheme.
|
|
| Tariff base | Sub-class C1: Relevant net premium income |
| Sub-class C2: Number of approved persons as at 31 December, calculated on the same basis as corresponding tariff base provisions for fee blocks A12, 13, and A14 in FEES 4 Annex 1 (even if the firm's approved persons are not counted for the purposes of those fee blocks), and multiplied by the firm's estimated proportion of business falling within sub-class C2 provided or deemed as provided in accordance with FEES 6. |
| Class D | Investment |
| Sub-class D1 | Fund Management |
| Legal basis for activity in sub-class D1 | Any of the following: |
|
agreeing to carry on a regulated activity which is within any of the above.
|
|
| Sub-class D2 | Investment Intermediation |
| Legal basis for activity in sub-class D2 | Any of the following activities in relation to designated investment business |
|
giving basic advice on a stakeholder product;
|
|
|
agreeing to carry on a regulated activity which is within any of the above;
|
|
| BUT excluding activities that relate to long-term insurance contracts or rights under a stakeholder pension scheme or a personal pension scheme. | |
| Tariff base | Sub-class D1: gross income. Gross income in respect of activities falling into fee block A9 must be calculated in accordance with the tariff base provisions for that fee block. In any case the calculation excludes any value attributable to activities which are simultaneously activities in sub-class D2 to the extent included there. |
| Sub-class D2: Number of approved persons or, for firms in contribution group A10 as at 31 March 2008, number of traders, as at 31 December, calculated on the same basis as corresponding tariff base provisions for fee blocks A12, A13, A10 and A14 in FEES 4 Annex 1, and multiplied by the firm's estimated proportion of business falling within sub-class D2 (except fee block A10) provided or deemed as provided in accordance with FEES 6. To avoid double-counting, when calculating the number of traders FSCS must deduct the number of approved persons who are also traders attributed to the firm for the purposes of FSA fee block A12, A13 or A14. |
| Class E | Home Finance |
| Sub-class E1 | Home Finance Provision |
| Legal basis for activity in sub-class E1 | Any of the activities below: |
|
agreeing to carry on a regulated activity which is within any of the above.
|
|
| Sub-class E2 | Home Finance Intermediation |
| Legal basis for activity in sub-class E2 | Any of the following activities: |
|
the activities of a home finance provider which would be arranging but for article 28A of the Regulated Activities Order (Arranging contracts or plans to which the arranger is party);
|
|
|
agreeing to carry on a regulated activity which is within any of the above.
|
|
| Tariff base | Sub-class E1: FSA periodic fees |
| Sub-class: E2: annual eligible income where the annual income is calculated in accordance with fee-block A18 in part 2 of FEES 4 Annex 1 |
| Notes | |
| (1) | Any reference in this annex to a specified investment includes a reference to rights to or interests in investments in that specified investment. |
| (2) | This paragraph deals with a tariff base calculation for a sub-class based on the calculations for corresponding specified fee blocks where this is not possible because there are no corresponding fee blocks. In this case the calculation is based on whichever of the specified fee blocks FSCS may reasonably choose. |
- 06/11/2007
FEES 6 Annex 4
Guidance on the calculation of tariff bases
- 06/11/2007
See Notes
This table belongs to FEES 6.5.8 G
| Calculation of gross income for firms who carry out discretionary fund management and are in sub-class D1 | |||
| 1.1 | G | The calculation of gross income for the purpose of sub-class D1 should be based on the calculation of fees under fee block A9. Gross income for the activity of managing investments is the sum of the following: | |
| (1) | the amount of the annual charge on all assets in portfolios which the firm manages on a discretionary basis received or receivable in the latest accounting period (this is calculated as a percentage of funds invested, typically 1% p.a.); plus | ||
| (2) | the front-end or exit charge levied on sales or redemptions of assets in portfolios which the firm manages on a discretionary basis (typically 4-5% of sales/redemptions) in that same accounting period; plus | ||
| (3) | the amount of performance management fees from the management of assets in portfolios which the firm manages on a discretionary basis received or receivable in that same accounting period; plus | ||
| (4) | any other income directly attributable to the management of assets in portfolios which the firm manages on a discretionary basis in that same accounting period, including commission and interest received. | ||
| 1.2 | G | Gross income should exclude: | |
| (1) | income received or receivable from assets managed on a non-discretionary basis, being assets that the firm has a contractual duty to keep under continuous review but in respect of which prior specific consent of the client must be obtained for proposed transactions, as this activity is covered in sub-class D2 (the investment intermediation sub-class); | ||
| (2) | income that the firm has rebated to customers or passed onto other firms (for instance where there is a commission chain). | ||
| 1.3 | G | A firm should make appropriate arrangements to ensure that income is not double counted in relation to the activities it undertakes (for example, where it operates and manages a personal pension scheme or collective investment scheme). | |
| Corresponding fee blocks | |||
| 2.1 | G | An example of a case covered by Note 2 in FEES 6 Annex 3R (Financial Services Compensation Scheme - classes and sub-classes) is as follows. The tariff base for sub-class C2 (Life and Pensions Intermediation) is based on approved persons, calculated on the same basis as the corresponding tariff base provisions for fee blocks A12, 13, and A14. However firms carrying on business originally falling within fee block A19 (e.g. in relation to pure protection contracts) can also fall into sub-class C2. The note means that FSCS may choose whether the calculation is based on the tariff base applicable to A12, A13, or A14. | |
- 06/11/2007