SIFA 18.1 Fees

The FSA is an independent, non-governmental body, which is funded by levies on the financial services industry. We receive no funds from the public purse.

Broadly, we use three main types of fee to finance our activities:

1. (1)

   Periodic fees;

2. (2)

   Application fees; and

3. (3)

   Special Project fees.

Periodic fees are paid annually, to provide most of the funding we require to undertake our statutory functions.

Application fees contribute to the cost of processing applications for authorisation or recognition, or requests for significant variations to the permission of firms that are already authorised.

Special Project fees recover part of the costs of specific regulatory activities at the request of, and on behalf of, a fee-payer, where the activity primarily benefits that fee-payer. It is unlikely that this type of fee would apply to small firms.

Fundamentally, three things decide the fees that organisations have to pay us:

1. (1)

   What kind of activities they undertake (a firm's permission).

2. (2)

   The costs we incur in regulating that class, or classes, of activities.

3. (3)

   The scale on which they undertake those activities.

According to the permission a firm has with us, it is allocated to fee-blocks. Fee-blocks categorise fee-payers together who offer broadly similar products and services, ensuring they pay fees on a similar basis. The definitions of the fee-blocks are based on sets of regulated activities.

The cost we expect to incur in undertaking our functions is known as our Annual Funding Requirement (AFR). This AFR is split into an AFR for each fee-block, using our internal costing system.

The scale on which firms undertake activities is measured by each fee-block tariff-base. Tariff-bases are proxies for potential impact, as indicated by the size of the business reported by the tariff-base. Tariff-bases are usually different for each fee-block.

Tariff-bases combined with the fee-tariff rates for each fee-block, allow the calculation of periodic fees for individual fee-payers. So, for each fee-block, the fee calculation is: Periodic fee = (tariff-base data for firm) x (fee-block tariff-rates)

Typically, the permission (set of regulated activities) granted to an independent financial adviser would cause the firm to be allocated to fee-block A.13 (Advisers, arrangers, dealers and brokers NOT holding and/or controlling client money and/or client assets).

The tariff-base for this fee-block is the number of approved persons, in customer functions 21, 22, 24, 25 and 26. Therefore, firms falling into this fee-block would pay periodic fees based on this measure, multiplied by the fee tariff-rates for the fee-block.

The fee tariff-rates for each fee-block are in the FSA Handbook, in the Supervision Manual (SUP 20 Annex 1).

Any organisation applying to us for authorisation or recognition has to pay an application fee. We also charge an application fee where firms currently authorised seek significant variations to their permission. Application fees must be paid whether or not the application is successful and are not refundable. This reflects the fact that we commit resources to applications when they are received; so all applications have a cost to us regardless of their outcome.

Application fees are flat rate fees that vary according to the category of business for which authorisation is being sought. For applicants that wish to become authorised persons there are three main types of application fees:

1. (1)

   straightforward;

2. (2)

   moderately complex; and

3. (3)

   complex.

The complexity of an application is determined by the fee-block(s) to which an applicant would be allocated if the application were successful.

Typically, applications from small firms such as independent financial advisers would be classed as straightforward. This reflects the fact that the typical permission profile of such firms would cause them to be allocated to either fee-block A.12 or A.13. Applications for the activities covered by these fee-blocks are deemed to be straightforward.

An authorised firm may seek to significantly vary their scope of permission, and that extension, if granted, may cause them to fall into new fee-blocks they were not allocated to before the variation. In these cases, a permission variation fee is payable. These fees are charged at 50% of the equivalent application fee for the new fee-block(s).

Application fee rates for each fee-block are located in the FSA Handbook, in the Authorisation Manual ( AUTH 4 Annex 1).

The main sections of the FSA Handbook relating to fees that small firms should be aware of are:

1. (1)

   general provisions regarding fees: GEN 3;

2. (2)

   application fee rules and current rates per fee-block: AUTH 4, AUTH 4 Annex 1;

3. (3)

   periodic fee rules, current rates per fee-block and fee-block definitions: SUP 20, SUP 20 Annex 1; and

4. (4)

   permission variations: SUP 6.3.22 R.

Firms should also be aware that in January of each year we produce a consultation paper indicating the proposed fee rates for the coming financial year (1 April - 31 March). The FSA Board makes the final fee rates for the financial year in May (with the exception of application fee rates, which are made in March, before the beginning of the financial year). Small firms should expect to receive a periodic fee invoice in June/July each year.

In June each year our Consolidated Policy Statement on our fee raising arrangements is updated. This document provides further detail on our fee policy, and you will find it under the Publications section of our website.