COMP 13.6 Compensation costs

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.

1. (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. (2)

   The FSCS must allocate any part of a compensation costs levy that relates to IFA pensions review claims in accordance with COMP 13.6A.1 R (IFA pensions review compensation levies).2

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.

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.

A participant firm must pay to the FSCS a share of each compensation costs levy unless either the firm is exempt under COMP 13.3 (Exemption) or the FSCS has chosen to exercise its discretion under COMP 13.4.20 R in respect of that firm.5

The FSCS must calculate a participant firm's share of a compensation costs levy (subject to COMP 13.6A.1 R (IFA pensions review compensation levies)) on the same basis as a specific costs levy under COMP 13.5.6 R, COMP 13.5.7 R and COMP 13.5.8 R.2

When calculating a participant firm's share of a compensation costs levy or specific costs levy allocated to:

1. (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 COMP 13.6.8 R.;

2. (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 SUP 20 Annex 1 which are identified in COMP 13.6.9 R;

3. (3)

   the investment business sub-scheme, where any part of the levy relates to IFA pensions review claims, the FSCS must comply with COMP 13.6A.1 R (IFA pensions review compensation levies);

4. (4)

   the mortgage advice and arranging sub-scheme, the FSCS must use the contribution group and tariff base set out in the table in COMP 13.6.9A R;6

5. (5)

   the general insurance mediation sub-scheme, the FSCS must use the contribution group and tariff base set out in the table in COMP 13.6.9B R.642

Unless exempt under COMP 13.3.1 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) 7with a statement of:

1. (1)

   the contribution groups to which it belongs; and

2. (2)

   the total amount of business (measured in accordance with the appropriate tariff base or bases) which it conducted, as at 31 December of the previous year, in relation to each of those contribution groups.

If the information in COMP 13.6.11 R has been provided to the FSA under other rule obligations, a participant firm will be deemed to have complied with COMP 13.6.11 R.

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.

If a participant firm does not submit a complete statement by the date on which it is due in accordance with COMP 13.6.11 R and any prescribed submission procedures:7

1. (1)

   the firm must pay an administrative fee of £250 (but not if it is already subject to an administrative fee under SUP 20 Annex 2 Part 1 or DISP 5.5.1 R for the same financial year); and7

2. (2)

   the compensation costs levy and any specific costs levy will be calculated using (where relevant) the valuation or valuations of business applicable to the previous period, multiplied by the factor of 1.10 (or, if it has become a participant firm part way through a financial year, on the basis of the information provided to the FSA for the purposes of SUP 20.3.2R) or on any other reasonable basis, making such adjustments as seem appropriate in subsequent levies once the true figures are known.7