SIFA 18.2 Periodic Fees

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

• what kind of activities they undertake (a firm's permission);
• the costs we incur in regulating that class, or classes, of activities; and
• 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. So 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 number of approved persons used in the calculations is measured as at 31 December in the year before the period to which the fee applies. For 2005/06 fees the date is 31 December 2004.

The fee tariff-rates for each fee-block are in the FSA Handbook, in the Supervision Manual (SUP 20 Annex 1 R). SUP 20.3 sets out the rules about the information on which fees are calculated. A firm must send us any information required to calculate that firm's fee. In most cases a firm will provide this information as part of its compliance with other provisions of SUP.