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Status: You are viewing the version of the handbook as on 2005-12-31.

COMP 13.6 Compensation costs

COMP 13.6.1 R

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.

COMP 13.6.2 R
  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

COMP 13.6.3 R

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.

COMP 13.6.4 R

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.

COMP 13.6.5 R

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

COMP 13.6.6 R

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

COMP 13.6.7 R

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

COMP 13.6.8 R

Table: Contribution Groups for the Accepting Deposits Sub-scheme and the Insurance Business Sub-scheme for the Financial Services Compensation Scheme (see COMP 13.6.7 R (1))

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

Accepting deposits

A1 - deposit takers

Accepting deposits (article 5)

Protected deposits (see COMP 13.6.13R)

Insurance business

A3 - Insurance activities - General insurance

Effecting contracts of insurance and/or carrying out contracts of insurance (article 9) 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 9) that are long-term insurance contracts

Relevant net premium income

COMP 13.6.9 R

Table: The contribution groups and tariff bases for the investment business sub-scheme (see COMP 13.6.7 R (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 SUP 20 Ann 1).

SUB-SCHEME

CONTRIBUTION GROUP (references to A7 etc are to the activity groups in part 1 of SUP 20 Ann 1R)

LEGAL BASIS FOR ACTIVITY (this is merely a summary of the basis in part 1 of SUP 20 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 SUP 20 Ann 1R

Designated investment business

A7 - fund managers

Managing investments (article 33)

Funds under management

Designated investment business

A9 - managers of an AUT, ACDs and depositaries

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 48)

Gross income

Designated investment business

A10 - dealing as principal

Dealing in investments as principal (article 12).

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 19); (b) arranging (bringing about) deals in investments (article 21(1)); (c) making arrangements with a view to transactions in investments (article 22(2)); with permission to: (i) advise on investments (article 49); (ii) hold client money; and (iii) safeguarding and administering investments (article 36)

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 19); (b) arranging (bringing about) deals in investments (article 21(1)); (c) making arrangements with a view to transactions in investments (article 22(2)); with permission to advise on investments (article 49); but not to (i) hold client money; and (ii) safeguard and administer investments (article 36).

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 persons4321

COMP 13.6.9A R

6Table: the contribution groups and tariff bases for the mortgage advisers and arrangers (see COMP 13.6.7 R (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

Mortgage advice and arranging

A18 - Mortgage lenders, advisers and arrangers

Any of the following: (a) arranging (bringing about) regulated mortgage contracts; (b) making arrangements with a view to regulated mortgage contracts; (c) advising on regulated mortgage contracts; (d) agreeing to carry on a regulated activity which is within any of the above; and (e) the activities of a mortgage lender which would be arranging but for article 28A of the Regulated Activities Order (Arranging contracts to which the arranger is a party).

annual eligible income

COMP 13.6.9B R

6Table: the contribution groups and tariff bases for the general insurance intermediaries (see COMP 13.6.7 R (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) regulated mortgage contracts; (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

COMP 13.6.10 G

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

COMP 13.6.11 R

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.

COMP 13.6.12 R

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.

COMP 13.6.13 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.

COMP 13.6.14 R

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

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