FEES 6.5 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.

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

1. (1)

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

   4
2. (2)

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

   4

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

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

1. (1)

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

2. (2)

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

   4

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

1. (1)

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

2. (2)

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

3. (3)

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

4. (4)

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

5. (5)

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

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

1. (1)

   [deleted]4

2. (2)

   [deleted]4

3. (3)

   [deleted]4

4. (4)

   [deleted]4

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5. (5)

   [deleted]4

6FEES 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.

1. (1)

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

   1. (a)

      sub-classes to which it belongs; and4

   2. (b)

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

      5
2. (2)

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

3. (3)

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

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.

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.7

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

1. (1)

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

2. (2)

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