FEES 6.5 Compensation costs

12The FSCS must allocate any compensation costs levy:

1. (1)

   first, to the relevant classes (other than the deposit acceptors’ contribution class)15 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 class15; and

2. (1A)

   next, amongst the categories (if any) within each class:15

   1. (a)

      in proportion to the categories’ unused levy limits as at the date of the levy;15

   2. (b)

      up to those levy limits, subject to the conditions in FEES 6.5.2-AAR; and15

3. (2)

   thereafter, where the levy limit for a class15 has been reached (whether as a result of compensation costs or specific costs or both)15, to the retail pool, in accordance with, and subject to, FEES 6.5A and subject to the conditions in FEES 6.5.2-AA15.

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If 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

If 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

1. (1)

   A participant firm must pay to the FSCS a share of each compensation costs levy allocated to the classes and categories15 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. (2)

   [deleted]10

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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. (1)

   identifying each of the relevant classes and categories15 to which each participant firm belongs, using the statement of business most recently supplied under FEES 6.5.13 R (1);

2. (2)

   identifying the compensation costs falling within FEES 6.3.1R13 allocated, in accordance with FEES 6.5.2-AR13, to the classes and categories15 identified in (1);

3. (3)

   calculating, in relation to each relevant class and category15, the participant firm's tariff base (see FEES 6 Annex 3AR13) as a proportion of the total tariff base of all participant firms in the class or category as the case may be1513;

4. (4)

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

5. (5)

   if more than one class or category15 is relevant, adding together the figure in (4) for each class or category15.

16When identifying the relevant classes to which a TP firm belongs, the FSCS must identify the activity (or activities) in FEES 6 Annex 3AR that most closely matches that for which the TP firm is treated as having Part 4A permission.

1. (1)

   15This rule deals with the calculation of:

   1. (a)

      a participant firm’s compensation costs levy in the financial year of the compensation scheme following the financial year of the compensation scheme in which it became a participant firm; or

   2. (b)

      a participant firm’s compensation costs levy in the financial year of the compensation scheme in which it had its permission extended, and the following financial year of the compensation scheme; and

   the tariff base for the classes that relate to the relevant permissions or extensions, as the case may be.

2. (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. (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.

   1. (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.

   2. (b)

      If a participant firm satisfies the following conditions it must calculate its tariff base under (c) for the financial year following the financial year of the compensation scheme in which it became a participant firm or receives its extension of permission:

      1. (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

      2. (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 financial year of the compensation scheme.

   3. (c)

      If a participant firm satisfies the conditions in (b) it must calculate its tariff base as follows:

      1. (i)

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

      2. (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 financial year of the compensation scheme; and

      3. (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.

   4. (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 6.5.13R (Reporting requirements).

   5. (e)

      Where a participant firm is required to use actual data under this rule, FEES 6 Annex 3AR 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.

[Note: FEES 6.5.9CR was previously in FEES 6.4.10AR.]

1. (1)

   5Unless exempt under13 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 year13, by the date requested by the FCA13) with a statement of:4

   1. (a)

      10classes and categories15 to which it belongs; and4

      10
   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 3AR13 (Financial Services Compensation Scheme - classes)) ending before the relevant year in relation to each of those classes and categories15.

      101055
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)

   17Where the FCA grants a person’s application for annulment of a cancellation or variation of Part 4A permission under Schedule 6A to the Act and on the date the annulment takes effect the time for providing the statement in (1) has passed, then the requirement to have provided the statement does not apply, but a person must comply with (1) and (2), by providing the statement to the FCA on the date on which the person’s annulment takes effect.

   1010
4. (4)

   [deleted]15

   13

If the information in FEES 6.5.13 R has been provided to the FCA13 under other rule obligations, or in accordance with the PRA Rulebook,15 a participant firm will be deemed to have complied with FEES 6.5.13 R.

15The FSCS may use information provided in accordance with the PRA Rulebook or the FCA’s rules that relates to a previous period, if that information has not yet been provided in respect of the financial year of the compensation scheme in which a levy is being imposed, applying FEES 6.5.16R(2).

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 2A R, Part 119 or FEES 5.4.1 R for the same financial year13); and

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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 year13, on the basis of the information provided to the FCA13 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.