Financial Services Compensation Scheme Funding

Part

FEES Fees Manual

Chapter

Financial Services Compensation Scheme Funding

Printed on: 14/12/2024

Rulebook at: 27/07/2012

FEES 6

Financial Services Compensation Scheme Funding

FEES 6.1

Application

01/01/2006

FEES 6.1.1

This chapter applies to:

(1) every participant firm;

(2) the FSCS; and

(3) the Society.

06/04/2011

FEES 6.1.2

(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

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

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 6.1.4A

Section 224F of the Act enables the FSA to make rules to enable the FSCS to impose levies on authorised persons (or any class of authorised persons) in order to meet its management expenses incurred if, under Part 15A of the Act, it is required by HM Treasury to act in relation to relevant schemes. But those rules must provide that the FSCS can impose a levy only if the FSCS has tried its best to obtain reimbursement of those expenses from the manager of the relevant scheme.

12/10/2010

FEES 6.1.5

The FSCS may impose three types of levy: a management expenses levy, a compensation costs levy and a MERS levy. The FSCS has discretion as to the timing of the levies imposed.

12/10/2010

FEES 6.1.6

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

In order to allocate a share of the amount to be funded by an individual participant firm, the funding arrangements are split into five classes: the deposit class; the life and pensions class; the investment class; the home finance class and the general insurance class. The business carried on by a participant firm determines into which class, or classes, it falls.

01/04/2008

FEES 6.1.8

Within each class there are one or more sub-classes. These relate to different types of activity carried on by participant firms within each class. Within a class, individual participant firms are allocated for funding purposes to one or more sub-classes, depending on their business activities. This, together with the provisions on the allocation of levies to sub-classes up to their levy limits, 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. The deposit class is made up of a single sub-class. This means that a reference to a sub-class will, unless the context otherwise requires, include a reference to the deposits class.

01/04/2008

The management expenses levy

FEES 6.1.9

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;

(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;

(3) expenses incurred under section 214B or section 214D of the Act as a result of the FSCS being required by HM Treasury to make payments in connection with the exercise of the stabilisation power under Part 1 of the Banking Act 2009; and

(4) expenses incurred under Part XVA of the Act as a result of the FSCS being required by HM Treasury to act in relation to a relevant scheme.

12/10/2010

FEES 6.1.10

A management expenses levy under COMP may consist of two 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. It would also likely include the cost of any insurance cover secured by FSCS against the risk of it paying claims out in circumstances where the levy limit of the particular class to which the claim would otherwise be attributable has exceeded its levy limit for the year, as the insurance cover is likely to benefit all classes which may have costs allocated to them if the levy limit of another class is breached. 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.

01/04/2008

FEES 6.1.11

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. It also may include the cost of any insurance cover that FSCS secures against the risk of FSCS paying out claims above a given level in any particular sub-class (but below the levy limit for that sub-class for the year) or the cost of commercial borrowing to allow FSCS to pay claims attributable to a particular sub-class in advance of the next levy. Where a levy limit has been reached and FSCS secures borrowing in order to pay claims allocated to another sub-class in accordance with the rules on allocation in FEES 6.5.2R, the costs of borrowing are attributable to the sub-class whose levy limit has been reached. The specific costs are allocated to the sub-class 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 sub-classes to which the FSCS has allocated specific costs. Each sub-class has a separate "tariff base" for this purpose, set out in FEES 6 Annex 3 R. Participant firms may be exempt from contributing to the specific costs levy.

01/04/2008

FEES 6.1.13

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

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

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, in making payments or giving indemnities under COMP 11.2.3 R and as a result of the FSCS being required by HM Treasury to make payments in connection with the exercise of the stabilisation power under Part 1 of the Banking Act 2009 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 up to relevant levy limits and then in accordance with the allocation provisions in FEES 6.5.2 R.

06/08/2010

FEES 6.1.16

If a participant firm is a member of more than one sub-class, 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 sub-classes. Each sub-class has a levy limit which is the maximum amount of compensation costs which may be allocated to a particular sub-class in a financial year for the purposes of a levy. Once the costs attributable to a particular sub-class have exceeded the levy limit the excess costs are allocated to the other sub-class in the same class, up to the levy limit of that other sub-class, and thereafter allocated to a 'general retail pool' of all the other sub-classes whose levy limits have not been reached (with the exception of the home finance providers). The amount of the excess cost to be allocated to each particular sub-class in the general retail pool is calculated pro-rata in accordance with the relative size of the levy limit of that sub-class to the sum of the levy limits of the remainder of the sub-classes in the general retail pool whose levy limits have not been reached. In the case of the deposits class, once the costs attributable to that class have exceeded the levy limit the excess costs are allocated to the general retail pool. The use made by FSCS of borrowing facilities to provide liquidity until the next levy does not affect this allocation of costs.

01/04/2008

FEES 6.1.16A

FSCS may consider obtaining insurance cover, if available, against the risk that the value of claims FSCS pays out exceeds the levy limits of, or given levels within, particular classes or sub-classes. Any costs associated with the insurance would be allocated proportionally to the classes or sub-classes intended to benefit from that insurance.

01/04/2008

Incoming EEA firms

FEES 6.1.17

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 sub-class.

01/04/2008

FEES 6.2

Exemption

01/01/2006

FEES 6.2.1

(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

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

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

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

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

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

The financial year of the compensation scheme is the twelve months ending on 31 March. The effect of FEES 6.2.6 R and FEES 6.2.1R (2) is that if a firm fails to notify FSCS of an exemption under FEES 6.2.1 R by 31 March it will be treated as non-exempt for the whole of the next financial year.

01/04/2008

FEES 6.2.8

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

The FSCS may at any time impose a management expenses levy, a compensation costs levy or a MERS 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.

12/10/2010

FEES 6.3.2

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

The FSCS may impose one or more levies in a financial year to meet its management expenses, its compensation costs or its management expenses in respect of relevant schemes. 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.

12/10/2010

FEES 6.3.4

The discretion over levying in COMP also gives the FSCS, if it thinks this appropriate, the ability to use third parties as its agents in raising and collecting the levies.

01/01/2006

Limits on compensation costs levies on sub-classes and classes

FEES 6.3.5

The maximum amount of compensation costs for which the FSCS can levy each sub-class and class in any one financial year of the compensation scheme is limited to the amounts set out in the table in FEES 6 Annex 2.

01/04/2008

Levy for compensation costs paid in error

FEES 6.3.10

The FSCS may include in a compensation costs levy the costs of compensation paid by the FSCS in error, provided that the payment was not made in bad faith.

06/12/2009

Management of funds

FEES 6.3.11

The FSCS must hold any amount collected from a specific costs levy or compensation costs levy to the credit of the classes and relevant sub-classes, in accordance with the allocation established under FEES 6.4.6 R and FEES 6.5.2 R.

01/04/2008

FEES 6.3.12

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

Interest earned by the FSCS in the management of funds held to the credit of a sub-class must be credited to that sub-class, and must be set off against the management expenses or compensation costs allocated to that sub-class.

01/04/2008

FEES 6.3.14

The FSCS must keep accounts which show:

(1) the funds held to the credit of each class and relevant sub-class; and

(2) the liabilities of that class and relevant sub-class.

01/04/2008

FEES 6.3.15

The FSCS may use the money collected from firms within one class to pay compensation costs in respect of any sub-class within that class, so long as it ensures that this is done without prejudice to the participant firms from whom the money has been collected.

01/04/2008

FEES 6.3.15A

FEES 6.3.15R deals with how FSCS may use money available to it and does not affect the rules on allocation in FEES 6.5.2R. Therefore the requirement that the procedure in FEES 6.3.15 R should not prejudice the participant firms does not apply to an allocation under FEES 6.5.2R.

01/04/2008

FEES 6.3.16

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 sub-class which has been used to pay the compensation costs of another sub-class within the same class as standing to the credit of the first sub-class;

(2) the FSCS should not raise a levy under FEES 6.3.1 R on a sub-class 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 sub-class to meet its expenses; and

(3) (2) would not be applicable to the extent that the funds used are in respect of costs allocated to the sub-class in accordance with the rules on allocation in FEES 6.5.2 R(1) and (2).

01/04/2008

FEES 6.3.17

(1) The FSCS may use any money held to the credit of one class (the creditor class) to pay compensation costs in respect of or allocated to another class (the debtor class) 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 class is reimbursed by the debtor class as soon as possible;

(b) the debtor class 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 class to the debtor class is taken into account by the FSCS when considering whether to impose a compensation costs levy on the creditor class under FEES 6.3.1 R.

01/04/2008

FEES 6.3.18

FEES 6.3.17 R deals with how FSCS may use money available to it and does not affect the rules on allocation in FEES 6.5.2 R. Therefore FEES 6.3.17R(2) (a), (b) and (c) do not apply where the costs otherwise attributable to one debtor class are allocated to the creditor class in accordance with the rules on allocation in FEES 6.5.2 R.

01/04/2008

FEES 6.3.19

Unless FEES 6.3.20 R applies, any recoveries made by the FSCS in relation to protected claims must be credited to the sub-classes to which the related compensation costs were allocated.

01/04/2008

FEES 6.3.20

(1) This rule applies where the FSCS makes recoveries in relation to protected claims where related compensation costs would have been met by a sub-class (sub-class A) had the levy limit for sub-class A not been reached and have therefore been met by another sub-class or sub-classes.
(2) This rule applies even though the recovery is made in a subsequent financial year.
(3) Recoveries referred to in (1) must be applied in the following order of priority:

(a) (if the compensation costs were allocated to the general retail pool (see FEES 6.5.2 R(2)) to the classes and sub-classes to which the costs were allocated in accordance FEES 6.5.2 R(2) in the same proportion as those classes and respective sub-classes contributed, up to the total amount of that allocation plus interest at a rate equivalent to the Bank of England's repo rate from time to time in force;
(b) (if the compensation costs were allocated to the other sub-class in the same class as sub-class A) to that other sub-class up to the total amount of that allocation plus interest at a rate equivalent to the Bank of England's repo rate from time to time in force; and
(c) sub-class A.

01/04/2008

FEES 6.3.20A

Recoveries under FEES 6.3.20 R are net of the costs of recovery.

01/04/2008

FEES 6.3.21

If the FSCS has more funds to the credit of a sub-class than the FSCS believes will be required to meet levies on that sub-class for the next 12 months, it may refund the surplus to members or former members of the sub-class on any reasonable basis.

01/04/2008

Adjustments to calculation of levy shares

FEES 6.3.22

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; or

(4) amounts that the FSCS has not been able to recover from participant firms after having taken reasonable steps; or

(5) FEES 2.3 (Relieving Provisions), FEES 6.4.8 R (New participant firms), FEES 6.5.9 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.

01/11/2008

FEES 6.3.22A

The FSCS may not adjust the calculation of a participant firm's share of any levy under FEES 6.3.22 R on the grounds that it would be inequitable for that firm to pay that share or part of it or on the grounds that it would be inequitable for the FSCS to retain that share or part of it.

01/11/2008

FEES 6.3.22B

The reason for FEES 6.3.22A R is that any such claim should be dealt with under FEES 2.3 (Relieving Provisions).

01/11/2008

Firms acquiring businesses from other firms

FEES 6.3.22C

(1) This rule applies to the calculation of the levies of a firm (A) if:

(a) either:

(i) A acquires all or a part of the business of another firm (B), whether by merger, acquisition of goodwill or otherwise; or

(ii) A became authorised as a result of B's simple change of legal status (as defined in FEES 3 Annex 1 Part 6);

(b) B is no longer liable to pay a levy; and

(c) that acquisition or change takes place after the date to which, or as of which, A's most recent statement of business under FEES 6.5.13 R is drawn up so far as concerns the sub-classes covered by B's business.

(2) A must pay an additional amount equal to the levy that would have been payable by B in relation to the relevant business and relevant sub-classes if the acquisition or change in status had not taken place and B had remained liable to pay levies. The amount is based on the most recent information supplied by B under FEES 6.5.13 R. A is included in the sub-classes applicable to the relevant business.

(3) This rule only applies with respect to those financial years of the FSCS for which A's levies are calculated on the basis of a statement of business under FEES 6.5.13 R drawn up to a date, or as of a date, before the acquisition or change in legal status took place.

01/01/2009

Remission of levy or additional administrative fee

FEES 6.3.23

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

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 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

(2) 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:

(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;

on or after 1 January 2004.

01/04/2008

FEES 6.4

Management expenses

01/01/2006

Obligation on participant firm to pay

FEES 6.4.1

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

01/01/2006

Limit on management expenses

FEES 6.4.2

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

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.

01/04/2008

FEES 6.4.4

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 and specific costs levy.

01/04/2008

Base costs levy

FEES 6.4.5

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

The FSCS must allocate any specific costs levy amongst the relevant sub-classes in proportion to the amount of relevant costs arising from, or expected to arise from, claims in respect of the different activities represented by those sub-classes.

01/04/2008

FEES 6.4.7

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) by:

(1) identifying each of the relevant sub-classes 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 which the FSCS has incurred, or expects to incur, in the relevant financial year of the compensation scheme, allocated to the sub-classes identified in (1), but not yet levied;

(3) calculating, in relation to each relevant sub-class FF, 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) applying the proportion calculated in (3) to the figure in (2); and

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

01/04/2008

New participant firms

FEES 6.4.8

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 6.4.10

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 through the modified fee provisions of FEES 4.2.6 R, no rule is necessary in COMP for discounts on the base costs levy.

01/04/2008

Specific costs levy for newly authorised firms

FEES 6.4.10A

(1) This rule deals with the calculation of:

(a) a participant firm's specific costs levy in the financial year of the FSCS following the FSCS financial year in which it became a participant firm; or

(b) a participant firm's specific costs levy in the financial year of the FSCS in which it had its permission extended, and the following FSCS financial year; and

(c) the tariff base for the class or sub-classes that relate to the relevant permissions or extensions, as the case may be.

(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) 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.

(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.

(b) If a participant firm satisfies the following conditions it must calculate its tariff base under (c) for the FSCS financial year following the FSCS financial year it became a participant firm:

(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

(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 FSCS financial year.

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

(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 FSCS financial year; and

(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.

(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).

(e) Where a participant firm is required to use actual data under this rule FEES 6 Annex 3 R 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.

01/04/2009

Application of FEES 6.4.10AR

FEES 6.4.10B

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 6.4.10B. 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 FSCS financial year unless otherwise stated.

Type of permission acquired on 1 November

Tariff base

Valuation date but for FEES 6.5.13BR

Data period under FEES 6.5.13bR

Accepting deposits

Protected deposits

As at 31 December 2009

Effecting contracts of insurance
(Insurers - general)

Relevant net premium income

The firm's tariff base calculated in the year 2009 - so projected valuation will be used.

1 November to 31 December 2009

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

01/04/2009

FEES 6.4A

Management expenses in respect of relevant schemes

12/10/2010

Obligation on participant firm to pay

FEES 6.4A.1

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

12/10/2010

Restriction on management expenses in respect of relevant schemes

FEES 6.4A.2

The FSCS can impose a MERS levy only if the FSCS has tried its best and has failed to obtain reimbursement of those expenses from the manager of the relevant compensation scheme.

12/10/2010

Management expenses in respect of relevant schemes levy

FEES 6.4A.3

The FSCS must calculate a participant firm's share of a MERS levy on a reasonable basis.

12/10/2010

FEES 6.5

Compensation costs

01/01/2006

FEES 6.5.1

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

The 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) 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); and 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); and
(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.

01/04/2008

FEES 6.5.2A

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

01/04/2008

FEES 6.5.2B

The 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) and not the remaining capacity in each sub-class.

01/04/2008

FEES 6.5.2C

When FSCS allocates excess compensation costs levies otherwise attributable to a class which has reached its levy limit, in accordance with FEES 6.5.2R (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.

01/04/2008

FEES 6.5.3

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 sub-class 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 R.

01/04/2008

FEES 6.5.4

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 sub-class 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.

01/04/2008

FEES 6.5.5

(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.

(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.

01/04/2008

FEES 6.5.6

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:

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

(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);

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

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

01/04/2008

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

FEES 6.5.7

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

(1) [deleted]

(2) [deleted]

(3) [deleted]

(4) [deleted]

(5) [deleted]

01/04/2008

FEES 6.5.8

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

01/04/2008

New participant firms

FEES 6.5.9

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.

01/04/2008

Compensation costs levy for newly authorised firms

FEES 6.5.9A

FEES 6.4.10AR applies to the calculation of a participant firm's compensation costs levy and its tariff base as it applies to the calculation of its specific costs levy.

01/04/2009

FEES 6.5.9B

The example table in FEES 6.4.10B G can be applied to the calculation of the tariff bases under FEES 6.5.9AR.

01/04/2009

Membership of several classes or sub-classes

FEES 6.5.12

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

01/04/2008

Reporting requirements

FEES 6.5.13

(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 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.

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

(3) This rule does not apply in relation to the home finance provision sub-class E1. Therefore 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.

01/11/2008

FEES 6.5.13A

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.

01/11/2008

FEES 6.5.14

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

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

31/12/2010

FEES 6.5.16

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

FEES 6.6

Incoming EEA firms

01/01/2006

FEES 6.6.1

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

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

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

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

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

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

If a firm ceases to be a participant firm or carry out activities within one or more sub-classes part way through a financial year of the compensation scheme:

(1) it will remain liable for any unpaid levies which the FSCS has already made on the firm; and

(2) the FSCS may make one or more levies upon it (which may be before or after the firm has ceased to be a participant firm or carry out activities within one or more sub-classes, 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 or firms carrying out activities within that sub-class in the financial year it ceased to be a participant firm or carry out activities within that sub-class.

(3) [deleted]

(4) [deleted]

(5) [deleted]

01/10/2011

FEES 6 Annex 1

Financial Services Compensation Scheme - Management Expenses Levy Limit

01/04/2006

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

1 April 2008 to 31 March 2009

£1,000,000,000 provided that £600,000,000 may be recovered in respect of specific costs relating to the declaration by the FSA on 27 September 2008 that Bradford & Bingley plc is in default only.

1 April 2009 to 31 March 2010

£1,000,000,000

1 April 2010 to 31 March 2011

£1,000,000,000

1 April 2011 to 31 March 2012

£1,000,000,000

1 April 2012 to 31 March 2013

£1,000,000,000

01/04/2012

FEES 6 Annex 2

Financial Services Compensation Scheme - annual levy limits

06/11/2007

This table belongs to FEES 6.3.5 R and FEES TP 2.5.2R

Class

Sub-class

Levy Limit (£ million)

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

Home Finance Intermediation

06/11/2007

FEES 6 Annex 3

Financial Services Compensation Scheme - classes and sub-classes

06/11/2007

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. and/or operating a dormant account fund.
BUT does not include any fee payer who either effects or carries out contracts of insurance.

Tariff base

(1) Protected deposits and/or
(2) Protected dormant accounts multiplied by 0.2 as at 31 December Except where paragraph (4) says otherwise, protected deposits must be adjusted as follows.

(1) Only include a protected deposit to the extent that an eligible claimant would have a claim in respect of it.

(2) Exclude any amount in respect of which the FSCS would not pay compensation due to the maximum payment limits in COMP 10.2.

(3) The tariff base calculation is made on the basis of the information that the firm would have to include in the single customer views it has to be able to produce under COMP 17 (Systems requirements for firms that accept deposits). The information must be of the extent and standard required if the firm was preparing the single customer views as at the valuation date for the tariff base (31 December).

(4) (a) If this paragraph applies, the adjustments in (1) to (3) do not apply and the calculation is based on protected deposits.

(b) This paragraph applies with respect to a protected deposit to the extent that, under COMP 17, the firm does not have to identify an eligible claimant with respect to that protected deposit because the account is held by the account holder on behalf of others.

(c) This paragraph applies with respect to a protected deposit that has been excluded from the single customer view because it is an account that is not active, as defined in COMP 17.2.3R (2).

Class B

General Insurance

Sub-class B1

General Insurance Provision

Legal basis for activity in sub-class B1

effecting contracts of insurance; and/or

carrying out contracts of insurance;

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:

dealing in investments as agent;

arranging (bringing about) deals in investments;

making arrangements with a view to transactions in investments;

assisting in the administration and performance of a contract of insurance;

advising on investments;

agreeing to carry on a regulated activity which is within any of the above.

Tariff base

Sub-class B1: Relevant net premium income and eligible gross technical liabilities. The levy is split into two in the ratio 75:25. The tariff base for the first portion (75%) is calculated by reference to relevant net premium income. The tariff base for the second portion (25%) is based on eligible gross technical liabilities.
Eligible gross technical liabilities are calculated in accordance with the method for calculating gross technical liabilities in fee block A3 in part 2 of FEES 4 Annex 1 with the following adjustments.
(1) Eligible gross technical liabilities are calculated by reference to protected contracts of insurance with eligible claimants.
(2) A firm may choose not to apply paragraph (1) and instead include all gross technical liabilities that it would be obliged to take into account for fee block A3 as long as the amount that it would include under (1) is lower.
(3) If an incoming EEA firm does not report gross technical liabilities in the way contemplated by this table, the firm's gross technical liabilities are calculated in the same way as they would be for a UK firm.
(4) None of the notes for the calculation of fees in fee block A3 in part 2 of FEES 4 Annex 1 apply except for the purposes of (2).
(5) A directive friendly society must also calculate eligible gross technical liabilities in accordance with this table.
(6) A non-directive friendly society must calculate gross technical liabilities as the amount that it is required to show in FSC 2 - Form 9 line 11 in Appendix 10 of IPRU(FSOC) (assets allocated towards the general insurance business required minimum margin) in relation to the most recent financial year of the firm (as at the applicable reporting date under FEES 6.5.13 R) for which the firm is required to have reported that information to the FSA under IPRU(FSOC). A non-directive friendly society must disregard for this purpose such amounts as are not required to be included by reason of a waiver or a written concession carried forward as an amendment to the rule to which it relates under SUP TP.

Sub-class B2: annual eligible income where annual eligible income means annual income adjusted in accordance with this table. Annual income is calculated as the sum of (a) and (b):
(a) the net amount retained by the firm of all brokerages, fees, commissions and other related income (for example, administration charges, overriders and profit shares) due to the firm in respect of or in relation to sub-class B2 activities, including any income received from an insurer; and
(b) if the firm is an insurer, in relation to sub-class B2 activities, the amount of premiums receivable on its contracts of insurance multiplied by 0.07, excluding those contracts of insurance which result from sub-class B2 activities carried out by another firm, where a payment has been made by the insurer to that other firm and that payment is of a type that falls under (a).
Notes relating to the calculation of the tariff base for sub-class B2:
(1) Exclude annual income for pure protection contracts. Only include general insurance contracts.
(2) The calculation is adjusted in accordance with the definition of annual eligible income.
(3) Net amount retained means all the commission, fees, etc. in respect of sub-class B2 activities that the firm has not rebated to customers or passed on to other firms (for example, where there is a commission chain). Items such as general business expenses (for example, employees' salaries and overheads) must not be deducted.
(4) Sub-class B2 activities mean activities that fall within sub-class B2. They also include activities that now fall within sub-class B2 but that were not regulated activities when they were carried out.
(5) A reference to a firm also includes a reference to any person who carried out activities that would now fall into sub-class B2 but which were not at the time regulated activities.

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

carrying out contracts of insurance;

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:

dealing in investments as agent;

arranging (bringing about) deals in investments;

making arrangements with a view to transactions in investments;

assisting in the administration and performance of a contract of insurance;

advising on investments;

advising on pension transfers and pension opt-outs;

providing 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 contracts (including pure protection contracts);

rights under a stakeholder pension scheme or a personal pension scheme.

Tariff base

Sub-class C1: Relevant net premium income and eligible mathematical reserves. The levy is split into two in the ratio 75:25. The tariff base for the first portion (75%) is calculated by reference to relevant net premium income. The tariff base for the second portion (25%) is based on mathematical reserves.
Eligible mathematical reserves are calculated in accordance with the method for calculating mathematical reserves in fee block A4 in part 2 of FEES 4 Annex 1 with the following adjustments.
(1) Eligible mathematical reserves are calculated by reference to protected contracts of insurance with eligible claimants.
(2) A firm may choose not to apply paragraph (1) and instead include all mathematical reserves that it would be obliged to take into account for fee block A4 as long as the amount that it would include under (1) is lower.
(3) If an incoming EEA firm does not report mathematical reserves in the way contemplated by this table, the firm's mathematical reserves are calculated in the same way as they would be for a UK firm.
(4) None of the notes for the calculation of fees in fee block A4 in part 2 of FEES 4 Annex 1 apply except for the purposes of (2).
(5) A directive friendly society must also calculate eligible mathematical reserves in accordance with this table.
(6) A non-directive friendly society must calculate mathematical reserves as the amount that it is required to show in FSC 2 - Form 9 line 23 in Appendix 10 of IPRU(FSOC) (total mathematical reserves after distribution of surplus) in relation to the most recent financial year of the firm (as at the applicable reporting date under FEES 6.5.13 R) for which the firm is required to have reported that information to the FSA under IPRU(FSOC). A non-directive friendly society must disregard for this purpose such amounts as are not required to be included by reason of a waiver or a written concession carried forward as an amendment to the rule to which it relates under SUP TP.
(7) The provisions relating to pension fund management business in Part 2 of FEES 4 Annex 1 do not apply. A firm undertaking such business that does not carry out any other activities within sub-class C1 (ignoring any activities that would have a wholly insignificant effect on the calculation of its tariff base for sub-class C1) must use its Long-term insurance capital requirement instead of gross technical liabilities. The Long-term insurance capital requirement means the amount that it is required to show as its Long-term insurance capital requirement in Form 2 Line 31 (Statement of solvency - Long-term insurance business) in relation to the most recent financial year of the firm (as at the applicable reporting date under FEES 6.5.13 R) for which the firm is required to have reported that information to the FSA.
(8) The split in the levy between relevant net premium income and eligible mathematical reserves does not apply to a partnership pension society (as defined in Chapter 7 of IPRU(FSOC) (Definitions)). Instead the levy is only calculated by reference to relevant net premium income.

Sub-class C2: annual eligible income where annual eligible income means annual income adjusted in accordance with this table. Annual income is calculated as the sum of (a) and (b):
(a) the net amount retained by the firm of all brokerages, fees, commissions and other related income (for example, administration charges, overriders and profit shares) due to the firm in respect of or in relation to sub-class C2 activities including any income received from an insurer; and;
(b) if the firm is a life and pensions firm, in relation to sub-class C2 activities, the amount of premiums or commission receivable on its life and pensions contracts multiplied by 0.07, excluding those life and pensions contracts which result from sub-class C2 activities carried out by another firm, where a payment has been made by the life and pensions firm to that other firm and that payment is of a type that falls under (a).
Notes relating to the calculation of the tariff base for sub-class C2:
(1) Life and pensions contracts mean long-term insurance contracts (including pure protection contracts) and rights under a stakeholder pension scheme or a personal pension scheme.
(2) Life and pensions firm means an insurer. It also means a firm that provides stakeholder pension schemes or personal pension schemes if those activities fall into sub-class D1.
(3) The calculation is adjusted in accordance with the definition of annual eligible income.
(4) Net amount retained means all the commission, fees, etc. in respect of sub-class C2 activities that the firm has not rebated to customers or passed on to other firms (for example, where there is a commission chain). Items such as general business expenses (for example, employees' salaries and overheads) must not be deducted.
(5) Sub-class C2 activities mean activities that fall within sub-class C2. They also include activities that now fall within sub-class C2 but that were not regulated activities when they were carried out.
(6) A reference to a firm also includes a reference to any person who carried out activities that would now fall into sub-class C2 but which were not at the time regulated activities.

Class D

Investment

Sub-class D1

Fund Management

Legal basis for activity in sub-class D1

Any of the following:

managing investments;

establishing, operating or winding up a regulated collective investment scheme;

establishing, operating or winding up an unregulated collective investment scheme;

acting as trustee of an authorised unit trust scheme;

acting as the depositary or sole director of an open-ended investment company;

establishing, operating or winding up a stakeholder pension scheme;

establishing, operating or winding up a personal pension scheme;

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

dealing in investments as principal;

dealing in investments as agent;

MiFID business bidding;

arranging (bringing about) deals in investments;

making arrangements with a view to transactions in investments;

advising on investments;

providing basic advice on a stakeholder product;

safeguarding and administering investments;

arranging safeguarding and administering of assets;

operating a multilateral trading facility;

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: annual eligible income where annual eligible income means annual income adjusted in accordance with this table. Annual income is equal to the net amount retained by the firm of all income due to the firm in respect of or in relation to activities falling within sub-class D1.

Sub-class D2: annual eligible income where annual eligible income means annual income adjusted in accordance with this table. Annual income is equal to the net amount retained by the firm of all income due to the firm in respect of or in relation to activities falling within sub-class D2.

Notes on annual eligible income for sub-classes D1 and D2:

(1) For the purposes of calculating annual income, net amount retained means all the commission, fees, etc. in respect of activities falling within sub-class D1 or D2, as the case may be, that the firm has not rebated to customers or passed on to other firms (for example, where there is a commission chain). Items such as general business expenses (for example employees' salaries and overheads) must not be deducted.

(2) The calculation is adjusted in accordance with the definition of annual eligible income.

(3) Box management profits are excluded from the calculation of annual income.

Class E

Home Finance

Sub-class E1

Home Finance Provision

Legal basis for activity in sub-class E1

Any of the activities below:

entering into a home finance transaction;

administering a home finance transaction;

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:

arranging (bringing about) a home finance transaction;

making arrangements with a view to a home finance transaction;

advising on home finance transactions;

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)

In calculating annual eligible income a firm must apportion income between different sub-classes and between income that falls within the definition of annual eligible income and income that does not in a reasonable and consistent way and on the basis of clear policies.

(3)

The question of whether a person is an eligible claimant or not or whether a contract of insurance is a protected contract or not or whether business is compensatable business or not must be judged at whichever of the following dates the firm chooses:
(a) (for a person who has become a new client during the period by reference to which the firm's tariff base is being calculated) the date on which the person becomes a client;
(b) (for a person who has ceased to be a client during that period) the date on which the person ceases to be a client; or
(c) (in any other case) the date to which the most recent information supplied by the firm under FEES 6.5.13 R is prepared.
However this does not apply for the purpose of calculating the tariff base for class A (Deposits) so far as it relates to protected deposits.

27/07/2012

FEES 6 Annex 4

Guidance on the calculation of tariff bases

06/11/2007

This table belongs to FEES 6.5.8 G

Calculation of annual eligible income for firms in sub-class D1 who carry out discretionary fund management and are in FSA fee block A7

-1.1

The tariff base for sub-class D1 is calculated by taking gross income falling into sub-class D1 and then deducting commission, fees and similar amounts rebated to customers or passed on to other firms (for example, where there is a commission chain). Items such as general business expenses (for example employees' salaries and overheads) should not be deducted. The calculation should be further adjusted so as to exclude income that is not attributable to business conducted with or for the benefit of eligible claimants, unless the firm chooses to include such income.

1.1

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

Annual eligible income should exclude

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).

1.3

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).

Calculation of annual eligible income for firms in sub-class D1 and who carry out activities within FSA fee block A9

2.1

The calculation of income in respect of activities falling into sub-class D1 and FSA fee block A9 should be based on the tariff base provisions for that fee block (in Part 2 of FEES 4 Annex 1). It should be adjusted so as to exclude income that is not attributable to business conducted with or for the benefit of eligible claimants, unless the firm chooses to include such income.

2.2

Although the calculation should be based on the one for fee block A9, the calculation is not the same. FSA fee block A9 is based on gross income. Sub-class D1 is based on net income retained.

Calculation of annual eligible income for a firm in sub-classB2 or sub-classC2

3.1

The amount of annual eligible income should include the amount of any trail or renewable commission due to the firm. Trail commission is received as a small percentage of the value of a policy on an ongoing basis. Renewable commission is received from a very small percentage of the value of a policy from ongoing premiums often received once the initial commission period is over.

Difficulties in calculating annual eligible income

4.1

The purpose of Note 2 in the section of notes at the end of FEES 6 Annex 3 R (Financial Services Compensation Scheme - classes and sub-classes) is to deal with the practical difficulties of allocating income correctly between different sub-classes and in deciding whether income falls outside FEES 6 Annex 3 R altogether. Note 2 requires a firm to carry out the necessary apportionment on a reasonable and consistent basis.

4.2

The following provides some guidance as to how firms may approach the allocation of annual eligible income.

4.3

Where a firm cannot separate its income on the basis of activities, such as a fund manager which acts on a discretionary and non-discretionary basis for the same client and who only sends out a single invoice, the firm may apportion the income in another way. For instance, a firm may calculate that the business it undertook for a client was split 90% on a discretionary basis and 10% on a non-discretionary basis calculated by reference to funds under management. The firm may split the income accordingly.

4.4

A firm may allocate trail or renewable commission on the basis of the type of firm it receives it from. For instance, if it comes from a life provider the firm may consider it as life and pensions mediation income. If it comes from a fund manager the firm may treat it as investment mediation income.

4.5

If a firm receives annual eligible income from a platform based business it may report annual eligible income in line with the proportionate split of business that the firm otherwise undertakes. For instance, if a firm receives 70% of its other commission from life and pensions mediation business and 30% from investment mediation business, then it may divide what it receives in relation to the platform business on the same basis.

4.6

Unless a firm chooses to include all relevant annual income, annual eligible income excludes business that is not compensatable under the compensation scheme. This can create difficulties because, for example, a person may move between being and not being an eligible claimant over time. The purpose of Note 3 in the section of notes at the end of FEES 6 Annex 3 R is to deal with that difficulty by fixing a date for deciding this.

Gross technical liabilities and mathematical reserves for non-directive friendly societies

5.1

The tariff base for a non-directive friendly society carrying out general insurance business is based in part on gross technical liabilities and the tariff base for a non-directive friendly society carrying out life insurance business is based in part on mathematical reserves. These concepts do not directly apply to non-directive friendly societies and so the tariff base calculation uses a corresponding concept.

5.2

The figures for gross technical liabilities and mathematical reserves of a non-directive friendly society for the purpose of calculating its tariff base in sub-class B1 (General Insurance Provision) and C1 (Life and Pensions Provision) are based on a valuation. This valuation only has to be made every three years. FEES 6 does not require a non-directive friendly society to update that information every year. Instead the figures from a non-directive friendly society's valuation will be used on a rolling three year basis for the purposes of the levy calculations in FEES 6. The effect of this calculation is therefore to modify the normal basis on which information is supplied under FEES 6.5.13 R.

01/04/2010