FEES 6.5 Compensation costs
Allocation: all classes except A, B and C
12The FSCS must allocate any compensation costs levy:
- (1)
first, to the relevant classes in proportion to the amount of compensation costs arising from, or expected to arise from, claims in respect of the different activities for which firms in those classes have permission up to the levy limit of each relevant class. The FCA provider contribution classes are not relevant classes for this purpose; and
- (2)
thereafter, where the levy limit has been reached (whether as a result of compensation costs or specific costs or both) for a class whose attributable costs may be allocated to the retail pool (see FEES 6 Annex 5), to the retail pool, in accordance with, and subject to, FEES 6.5A.
4The use made by FSCS of borrowing facilities to provide liquidity until the next levy does not affect the attribution of compensation costs, nor the10 allocation of compensation cost levies; the allocation of a compensation costs levy occurs at the time that the FSCS imposes a levy.
10If a participant firm which is in default has carried on a regulated activity other than in accordance with a permission, the FSCS must treat10 any compensation costs or specific costs arising out of that activity as if the relevant permission were held by the participant firm.10
10410If the relevant person in default is an appointed representative, the FSCS must treat10 any compensation costs or specific costs arising out of a regulated activity for which his principal has not accepted responsibility to as if the principal had accepted responsibility.10
10410- (1)
A participant firm must pay to the FSCS a share of each compensation costs levy allocated to the classes of which it is a member10 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)
[deleted]10
104
12The 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 relevant classes to which each participant firm belongs, using the statement of business most recently supplied under FEES 6.5.13 R (1);
- (2)
identifying the compensation costs falling within FEES 6.5.1 R allocated, in accordance with FEES 6.5.2 R, to the classes identified in (1);
- (3)
calculating, in relation to each relevant class, the participant firm's tariff base (see FEES 6 Annex 3A) as a proportion of the total tariff base of all participant firms in the class, using the statement of business most recently supplied under FEES 6.5.13 R (but this paragraph is modified for a compensation costs levy allocated to an FCA provider contribution class in the retail pool by FEES 6.5A.6 R);
- (4)
applying the proportion calculated in (3) to the figure in (2); and
- (5)
if more than one class is relevant, adding together the figure in (4) for each class.
4Classes and tariff bases for compensation cost levies and specific costs levies10
Guidance on parts of FEES 6 Annex 3 R can be found in FEES 6 Annex 4 G.44
New participant firms4
A firm or a recognised investment exchange14 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.4
Compensation costs levy for newly authorised firms
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.
6The example table in FEES 6.4.10B G can be applied to the calculation of the tariff bases under FEES 6.5.9AR.
Membership of several classes105
[deleted]4
Reporting requirements
- (1)
5Unless exempt under FEES 6.2.1 R or FEES 6.2.1A R11, 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 appropriate regulator) with a statement of:4
- (a)
10classes to which it belongs; and4
10 - (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)) ending before the relevant year in relation to each of those classes10.5
105
- (a)
- (2)
In this rule the relevant year means the year in which the month of February referred to in (1) falls.4
- (3)
[deleted]10
10
For example, when the tariff base for a particular class10 is based on a firm's annual eligible income the valuation period for that class10 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 class10 A1 (Deposits) its valuation period will be 31 December.5
1010If the information in FEES 6.5.13 R has been provided to the appropriate regulator under other rule obligations, a participant firm will be deemed to have complied with FEES 6.5.13 R.
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 2A R, Part 119 or FEES 5.4.1 R for the same financial year); and
19 - (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 appropriate regulator 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.