FEES 6

Financial Services Compensation Scheme Funding

FEES 6.1

Application

FEES 6.1.1

See Notes

handbook-rule
This chapter applies to:
(1) every participant firm;
(2) the FSCS; and
(3) the Society.

FEES 6.1.2

See Notes

handbook-guidance

(1) Firms which are not participant firms (such as certain types of incoming EEA firms, service companies and ICVCs) are not required to contribute towards the funding of the compensation scheme.

(2) Although a member is a participant firm for the purposes of most provisions of COMP, a member is excluded from the definition of participant firm for the purposes of FEES 6 (see definition of participant firm in Glossary). This is because the fees levied in relation to the carrying on of insurance market activities by members will be imposed on Society rather than individually on each member (see FEES 6.3.24 R).

Purpose

FEES 6.1.3

See Notes

handbook-guidance
The purpose of this chapter is to set out the requirements on participant firms to pay levies imposed by the FSCS to provide funding for its functions.

General structure

FEES 6.1.4

See Notes

handbook-guidance
Section 213(3)(b) of the Act requires the FSA to make rules to enable the FSCS to impose levies on authorised persons in order to meet its expenses. These expenses include in particular expenses incurred, or expected to be incurred, in paying compensation, borrowing or insuring risks.

FEES 6.1.5

See Notes

handbook-guidance
The FSCS may impose two types of levy: a management expenses levy, and a compensation costs levy. The FSCS has discretion as to the timing of the levies imposed.

FEES 6.1.6

See Notes

handbook-guidance
In calculating a compensation costs levy, the FSCS may include anticipated compensation costs for defaults expected to be determined in the 12-month period following the date of the levy. The total of all management expenses levies attributable to a financial year will be restricted to the amount set out on an annual basis in FEES 6 Annex 1.

FEES 6.1.7

See Notes

handbook-guidance
In order to allocate a share of the amount to be funded by an individual participant firm, the funding arrangements are split into five classes: the deposit class; the life and pensions class; the investment class; the home finance class and the general insurance class. The business carried on by a participant firm determines into which class, or classes, it falls.

FEES 6.1.8

See Notes

handbook-guidance
Within each class there are one or more sub-classes. These relate to different types of activity carried on by participant firms within each class. Within a class, individual participant firms are allocated for funding purposes to one or more sub-classes, depending on their business activities. This, together with the provisions on the allocation of levies to sub-classes up to their levy limits, meets a requirement of section 213(5) of the Act that the FSA, in making rules to enable the FSCS to impose levies, must take account of the desirability of ensuring that the amount of the levies imposed on a particular class of authorised person reflects, so far as practicable, the amount of claims made, or likely to be made, in respect of that class of person. The deposit class is made up of a single sub-class. This means that a reference to a sub-class will, unless the context otherwise requires, include a reference to the deposits class.

The management expenses levy

FEES 6.1.9

See Notes

handbook-guidance
Section 223 of the Act (Management expenses) prevents the FSCS from recovering, through a levy, any management expenses attributable to a particular period in excess of the limit set in COMP as applicable to that period. 'Management expenses' are defined in section 223(3) to mean expenses incurred or expected to be incurred by the FSCS in connection with its functions under the Act, except:
(1) expenses incurred in paying compensation; and
(2) expenses incurred as a result of the FSCS making the arrangements to secure continuity of insurance set out in COMP 3.3.1 R and COMP 3.3.2 R or taking the measures set out in COMP 3.3.3 R and COMP 3.3.4 R when a relevant person is an insurer in financial difficulties.

FEES 6.1.10

See Notes

handbook-guidance
A management expenses levy under COMP may consist of two elements. The first is a base costs levy, for the base costs of running the compensation scheme in a financial year, that is, costs which are not dependent upon the level of activity of the compensation scheme and which therefore are not referable to any specific default. Included in this category are items such as the salary of the members of the board of the FSCS, the costs of the premises which the FSCS occupies, and its audit fees. It would also likely include the cost of any insurance cover secured by FSCS against the risk of it paying claims out in circumstances where the levy limit of the particular class to which the claim would otherwise be attributable has exceeded its levy limit for the year, as the insurance cover is likely to benefit all classes which may have costs allocated to them if the levy limit of another class is breached. The amount that each participant firm pays towards a base costs levy is calculated by reference to the regulatory costs paid by the firm. All participant firms are liable to contribute towards a base costs levy.

FEES 6.1.11

See Notes

handbook-guidance
The second element of a management expenses levy is a specific costs levy for the "specific costs" of running the compensation scheme in a financial year. These costs depend on the number of claims and types of default, and include the salaries of the staff of the FSCS and legal and other professional fees paid in respect of particular defaults. It also may include the cost of any insurance cover that FSCS secures against the risk of FSCS paying out claims above a given level in any particular sub-class (but below the levy limit for that sub-class for the year) or the cost of commercial borrowing to allow FSCS to pay claims attributable to a particular sub-class in advance of the next levy. Where a levy limit has been reached and FSCS secures borrowing in order to pay claims allocated to another sub-class in accordance with the rules on allocation in FEES 6.5.2R, the costs of borrowing are attributable to the sub-class whose levy limit has been reached. The specific costs are allocated to the sub-class which is responsible for those costs under COMP, on the basis of the protected claims against that person. The FSCS may include in a specific costs levy the specific costs that the FSCS expects to incur (including in respect of defaults not yet declared at the date of the levy) during the financial year of the compensation scheme to which the levy relates. The amount that each participant firm pays towards the specific costs levy is calculated by reference to the amount of business conducted by the firm in each of the sub-classes to which the FSCS has allocated specific costs. Each sub-class has a separate "tariff base" for this purpose, set out in FEES 6 Annex 3 R. Participant firms may be exempt from contributing to the specific costs levy.

FEES 6.1.13

See Notes

handbook-guidance
The FSA intends to consult in January each year on the amount which it will set as the limit on the management expenses attributable to the forthcoming financial year of the FSCS.

The compensation costs levy

FEES 6.1.14

See Notes

handbook-guidance
The compensation costs levy is made up of the compensation costs which the FSCS has incurred and has not yet recovered from participant firms (less any recoveries it has made using the rights that have been assigned to it), together with those compensation costs it expects to incur (including in respect of defaults yet to be declared) over the 12 months following the date of the levy.

FEES 6.1.15

See Notes

handbook-guidance
Compensation costs are principally the costs incurred in paying compensation. Costs incurred in securing continuity of long-term insurance in safeguarding eligible claimants when insurers are in financial difficulties, and in making payments or giving indemnities under COMP 11.2.3 R are also treated as compensation costs. For funding purposes, these costs are allocated by the FSCS, and met by participant firms, in the same way as specific costs up to relevant levy limits and then in accordance with the allocation provisions in FEES 6.5.2 R.

FEES 6.1.16

See Notes

handbook-guidance

If a participant firm is a member of more than one sub-class, the total compensation costs levy and specific costs levy for that firm will be the aggregate of the individual levies calculated for the firm in respect of each of the sub-classes. Each sub-class has a levy limit which is the maximum amount of compensation costs which may be allocated to a particular sub-class in a financial year for the purposes of a levy. Once the costs attributable to a particular sub-class have exceeded the levy limit the excess costs are allocated to the other sub-class in the same class, up to the levy limit of that other sub-class, and thereafter allocated to a 'general retail pool' of all the other sub-classes whose levy limits have not been reached (with the exception of the home finance providers). The amount of the excess cost to be allocated to each particular sub-class in the general retail pool is calculated pro-rata in accordance with the relative size of the levy limit of that sub-class to the sum of the levy limits of the remainder of the sub-classes in the general retail pool whose levy limits have not been reached. In the case of the deposits class, once the costs attributable to that class have exceeded the levy limit the excess costs are allocated to the general retail pool. The use made by FSCS of borrowing facilities to provide liquidity until the next levy does not affect this allocation of costs.

FEES 6.1.16A

See Notes

handbook-guidance
FSCS may consider obtaining insurance cover, if available, against the risk that the value of claims FSCS pays out exceeds the levy limits of, or given levels within, particular classes or sub-classes. Any costs associated with the insurance would be allocated proportionally to the classes or sub-classes intended to benefit from that insurance.

Incoming EEA firms

FEES 6.1.17

See Notes

handbook-guidance
Incoming EEA firms which obtain cover or 'top up' under the provisions of COMP 14 are firms whose Home State scheme provides no or limited compensation cover in the event that they are determined to be in default. Under FEES 6.6, the FSCS is required to consider whether incoming EEA firm's should receive a discount on the amount that they would otherwise pay as their share of the levy, to take account of the availability of their Home State cover. The amount of any discount is recoverable from the other members of the incoming EEA firm's sub-class.

FEES 6.2

Exemption

FEES 6.2.1

See Notes

handbook-rule
(1) A participant firm which does not conduct business that could give rise to a protected claim by an eligible claimant and has no reasonable likelihood of doing so is exempt from a specific costs levy, or a compensation costs levy, or both, provided that:
(a) it has notified the FSCS in writing that those conditions apply; and
(b) the conditions in fact continue to apply.
(2) The exemption takes effect from the date on which the notice was received by the FSCS, subject to FEES 6.2.6 R.

FEES 6.2.2

See Notes

handbook-rule
FEES 6.2.1 R does not apply to a participant firm that may be subject to a claim under COMP 3.2.4 R.

FEES 6.2.3

See Notes

handbook-guidance
A participant firm to which FEES 6.2.2 R applies must report annual eligible income in accordance with FEES 6.5.13 R. Such a participant firm may take advantage of the option to report its annual income attributable to business conducted with or on behalf of eligible claimants.

FEES 6.2.4

See Notes

handbook-rule
A participant firm which is exempt under FEES 6.2.1 R must notify the FSCS in writing as soon as reasonably practicable if the conditions in FEES 6.2.1 R no longer apply.

FEES 6.2.5

See Notes

handbook-guidance
A participant firm to which the conditions in FEES 6.2.1 R no longer apply will then become subject to FEES 6.3.

FEES 6.2.6

See Notes

handbook-rule
If a participant firm ceases to conduct business that could give rise to a protected claim by an eligible claimant and notifies the FSCS of this under FEES 6.2.1R (1), it will be treated as a participant firm to which FEES 6.7.6 R applies until the end of the financial year of the compensation scheme in which the notice was given.

FEES 6.2.7

See Notes

handbook-guidance

The financial year of the compensation scheme is the twelve months ending on 31 March. The effect of FEES 6.2.6 R and FEES 6.2.1R (2) is that if a firm fails to notify FSCS of an exemption under FEES 6.2.1 R by 31 March it will be treated as non-exempt for the whole of the next financial year.

FEES 6.2.8

See Notes

handbook-rule
For the purposes of FEES 6.2.1 R a participant firm will only be exempt from a specific costs levy or compensation costs levy for any given financial year if it met the conditions in FEES 6.2.1 R on 31 March of the immediately preceding financial year.

FEES 6.3

The FSCS's power to impose levies

General limits on levies

FEES 6.3.1

See Notes

handbook-rule
The FSCS may at any time impose a management expenses levy or a compensation costs levy, provided that the FSCS has reasonable grounds for believing that the funds available to it to meet relevant expenses are, or will be, insufficient, taking into account:
(1) in the case of a management expenses levy, the level of the FSCS's anticipated expenditure in respect of those expenses in the financial year of the compensation scheme in relation to which the levy is imposed; and
(2) in the case of a compensation costs levy, the level of the FSCS's anticipated expenditure in respect of compensation costs in the 12 months following the levy.

FEES 6.3.2

See Notes

handbook-guidance
The calculation of levies will also take into account previous levies, where funds raised in anticipation of meeting liabilities prove either more or less than the amount actually required.

FEES 6.3.3

See Notes

handbook-guidance
The FSCS may impose one or more levies in a financial year to meet either its management expenses or its compensation costs. The FSCS may also impose interim levies, as part of its overall levy commitment. This flexibility allows the FSCS to phase its financing over the course of a financial year and thus avoid collecting levies from firms before the money is actually needed. The FSCS has committed itself in the Memorandum of Understanding with the FSA (the text of which can be found on the FSA website www.fsa.gov.uk) to publish regularly an indicative timetable for its levy procedures.

FEES 6.3.4

See Notes

handbook-guidance
The discretion over levying in COMP also gives the FSCS, if it thinks this appropriate, the ability to use third parties as its agents in raising and collecting the levies.

Limits on compensation costs levies on sub-classes and classes

FEES 6.3.5

See Notes

handbook-rule

The maximum amount of compensation costs for which the FSCS can levy each sub-class and class in any one financial year of the compensation scheme is limited to the amounts set out in the table in FEES 6 Annex 2.

Levy for compensation costs paid in error

FEES 6.3.10

See Notes

handbook-rule
The FSCS may include in a compensation costs levy the costs of compensation paid by the FSCS in error, provided that the payment was made in good faith.

Management of funds

FEES 6.3.11

See Notes

handbook-rule

The FSCS must hold any amount collected from a specific costs levy or compensation costs levy to the credit of the classes and relevant sub-classes, in accordance with the allocation established under FEES 6.4.6 R and FEES 6.5.2 R.

FEES 6.3.12

See Notes

handbook-rule
Any funds received by the FSCS by way of levy or otherwise for the purposes of the compensation scheme are to be managed as the FSCS considers appropriate, and in doing this the FSCS must act prudently.

FEES 6.3.13

See Notes

handbook-rule
Interest earned by the FSCS in the management of funds held to the credit of a sub-class must be credited to that sub-class, and must be set off against the management expenses or compensation costs allocated to that sub-class.

FEES 6.3.14

See Notes

handbook-rule
The FSCS must keep accounts which show:
(1) the funds held to the credit of each class and relevant sub-class; and
(2) the liabilities of that class and relevant sub-class.

FEES 6.3.15

See Notes

handbook-rule

The FSCS may use the money collected from firms within one class to pay compensation costs in respect of any sub-class within that class, so long as it ensures that this is done without prejudice to the participant firms from whom the money has been collected.

FEES 6.3.15A

See Notes

handbook-guidance
FEES 6.3.15R deals with how FSCS may use money available to it and does not affect the rules on allocation in FEES 6.5.2R. Therefore the requirement that the procedure in FEES 6.3.15 R should not prejudice the participant firms does not apply to an allocation under FEES 6.5.2R.

FEES 6.3.16

See Notes

handbook-guidance
FEES 6.3.15 R means that, for example:
(1) when crediting interest under FEES 6.3.13 R, the FSCS should regard any money collected from one sub-class which has been used to pay the compensation costs of another sub-class within the same class as standing to the credit of the first sub-class;
(2) the FSCS should not raise a levy under FEES 6.3.1 R on a sub-class solely because, as a result of the FSCS's action under FEES 6.3.15 R, there appear to be insufficient funds available to the credit of the sub-class to meet its expenses; and
(3) (2) would not be applicable to the extent that the funds used are in respect of costs allocated to the sub-class in accordance with the rules on allocation in FEES 6.5.2 R(1) and (2).

FEES 6.3.17

See Notes

handbook-rule
(1) The FSCS may use any money held to the credit of one class (the creditor class) to pay compensation costs in respect of or allocated to another class (the debtor class) if the FSCS has reasonable grounds to believe that this would be more economical than borrowing funds from a third party or raising a levy.
(2) Where the FSCS acts in accordance with (1), it must ensure that:
(a) the creditor class is reimbursed by the debtor class as soon as possible;
(b) the debtor class pays interest at a rate equivalent to the Bank of England's repo rate from time to time in force; and
(c) the amount lent by the creditor class to the debtor class is taken into account by the FSCS when considering whether to impose a compensation costs levy on the creditor class under FEES 6.3.1 R.

FEES 6.3.18

See Notes

handbook-guidance
FEES 6.3.17 R deals with how FSCS may use money available to it and does not affect the rules on allocation in FEES 6.5.2 R. Therefore FEES 6.3.17R(2) (a), (b) and (c) do not apply where the costs otherwise attributable to one debtor class are allocated to the creditor class in accordance with the rules on allocation in FEES 6.5.2 R.

FEES 6.3.19

See Notes

handbook-rule
Unless FEES 6.3.20 R applies, any recoveries made by the FSCS in relation to protected claims must be credited to the sub-classes to which the related compensation costs were allocated.

FEES 6.3.20

See Notes

handbook-rule
  1. (1) This rule applies where the FSCS makes recoveries in relation to protected claims where related compensation costs would have been met by a sub-class (sub-class A) had the levy limit for sub-class A not been reached and have therefore been met by another sub-class or sub-classes.
  2. (2) This rule applies even though the recovery is made in a subsequent financial year.
  3. (3) Recoveries referred to in (1) must be applied in the following order of priority:
    1. (a) (if the compensation costs were allocated to the general retail pool (see FEES 6.5.2 R(2)) to the classes and sub-classes to which the costs were allocated in accordance FEES 6.5.2 R(2) in the same proportion as those classes and respective sub-classes contributed, up to the total amount of that allocation plus interest at a rate equivalent to the Bank of England's repo rate from time to time in force;
    2. (b) (if the compensation costs were allocated to the other sub-class in the same class as sub-class A) to that other sub-class up to the total amount of that allocation plus interest at a rate equivalent to the Bank of England's repo rate from time to time in force; and
    3. (c) sub-class A.

FEES 6.3.20A

See Notes

handbook-guidance
Recoveries under FEES 6.3.20 R are net of the costs of recovery.

FEES 6.3.21

See Notes

handbook-rule

If the FSCS has more funds to the credit of a sub-class than the FSCS believes will be required to meet levies on that sub-class for the next 12 months, it may refund the surplus to members or former members of the sub-class on any reasonable basis.

Adjustments to calculation of levy shares

FEES 6.3.22

See Notes

handbook-rule
The FSCS may adjust the calculation of a participant firm's share of any levy to take proper account of:
(1) any excess, not already taken into account, between previous levies of that type imposed in relation to previous periods and the relevant costs actually incurred in that period; or
(2) participant firms that are exempt from the levy under FEES 6.2; or
(3) amounts that the FSCS has not been able to recover from participant firms as a result of FEES 6.3.5 R; or
(4) amounts that the FSCS has not been able to recover from participant firms after having taken reasonable steps; or
(5) FEES 6.4.8 R (New participant firms), FEES 6.5.9 R (New participant firms), FEES 6.3.23 R (Remission of levy or additional administrative fee) or FEES 6.6 (Incoming EEA firms); or
(6) anything else that the FSCS believes on reasonable grounds should be taken into account.

Remission of levy or additional administrative fee

FEES 6.3.23

See Notes

handbook-rule
If a participant firm's share of a levy or an additional administrative fee under FEES 6.7.4 R would be so small that, in the opinion of the FSCS, the costs of collection would be disproportionate to the amount payable, the FSCS may treat the participant firm as if its share of the levy or additional administrative fee amounted to zero.

Levies on the Society of Lloyd's

FEES 6.3.24

See Notes

handbook-rule
The FSCS may impose a levy on the Society to be calculated as the aggregate of the levies that would be imposed on each member if this chapter applied to members, as follows:
(1) a proportionate share of a base costs levy in respect of the compensation scheme's costs for the period from 1 January 2004 to the end of the compensation scheme's financial year and a share of such levies for all subsequent financial years; and
(2) a specific costs levy and a compensation costs levy in respect of costs arising out of a relevant person being in default, arrangements made under COMP 3.3.1 R or measures taken under COMP 3.3.3 R where:
(a) the default occurs or the circumstances giving rise to the arrangements being made or the measures being taken, as the case may be, occur; and
(b) the protected contracts of insurance in connection with which the costs arise were entered into;
on or after 1 January 2004.

FEES 6.4

Management expenses

Obligation on participant firm to pay

FEES 6.4.1

See Notes

handbook-rule
A participant firm must pay to the FSCS a share of each management expenses levy.

Limit on management expenses

FEES 6.4.2

See Notes

handbook-rule
The total of all management expenses levies attributable to a particular period of the compensation scheme may not exceed the limit applicable to that period set out in FEES 6 Annex 1.

Participant firm's share

FEES 6.4.3

See Notes

handbook-rule
A participant firm's share of a management expenses levy consists of one or more of: (1) a share of a base costs levy and (2) a share of a specific costs levy.

FEES 6.4.4

See Notes

handbook-rule
The FSCS must ensure that each participant firm's share of a management expenses levy separately identifies the firm's share of the base costs levy and specific costs levy.

Base costs levy

FEES 6.4.5

See Notes

handbook-rule

Unless FEES 6.3.22 R applies, the FSCS must calculate a participant firm's share of a base costs levy by:

  1. (1) identifying the base costs which the FSCS has incurred, or expects to incur, in the relevant financial year of the compensation scheme, but has not yet levied;
  2. (2) calculating the amount of the participant firm's regulatory costs as a proportion of the total regulatory costs relating to all participant firms for the relevant financial year; and
  3. (3) applying the proportion calculated in (2) to the figure in (1).

Specific costs levy

FEES 6.4.6

See Notes

handbook-rule
The FSCS must allocate any specific costs levy amongst the relevant sub-classes in proportion to the amount of relevant costs arising from, or expected to arise from, claims in respect of the different activities represented by those sub-classes.

FEES 6.4.7

See Notes

handbook-rule
The FSCS must calculate a participant firm's share of a specific costs levy (subject to FEES 6.3.22 R (Adjustments to calculation of levy shares) by:
(1) identifying each of the relevant sub-classes to which the participant firm belongs, using the statement of business most recently supplied under FEES 6.5.13 R;
(2) identifying the management expenses other than base costs which the FSCS has incurred, or expects to incur, in the relevant financial year of the compensation scheme, allocated to the sub-classes identified in (1), but not yet levied;
(3) calculating, in relation to each relevant sub-class FF, 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) applying the proportion calculated in (3) to the figure in (2); and
(5) if more than one class or sub-class is relevant, adding together the figure in (4) for each sub-class.

New participant firms

FEES 6.4.8

See Notes

handbook-rule
A firm 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 specific costs levy made in that year.

FEES 6.4.10

See Notes

handbook-guidance
Since a firm that becomes a participant firm in the course of a financial year of the compensation scheme will already be obtaining a discount in relation to the base costs levy through the modified fee provisions of FEES 4.2.6 R, no rule is necessary in COMP for discounts on the base costs levy.

FEES 6.5

Compensation costs

FEES 6.5.1

See Notes

handbook-rule
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.

FEES 6.5.2

See Notes

handbook-rule

The 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); and 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); and
  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.

FEES 6.5.2A

See Notes

handbook-guidance
The use made by FSCS of borrowing facilities to provide liquidity until the next levy does not affect the allocation of costs incurred or anticipated.

FEES 6.5.2B

See Notes

handbook-guidance
The calculation of the relative sizes of the levy limits for the purpose of FEES 6.5.2R (2) (including any allocations caused by the exhaustion of a receiving sub-class) is based on the original levy limit for the sub-classes (as set out in FEES 6 Annex 2) and not the remaining capacity in each sub-class.

FEES 6.5.2C

See Notes

handbook-guidance
When FSCS allocates excess compensation costs levies otherwise attributable to a class which has reached its levy limit, in accordance with FEES 6.5.2R (2), a sub-class to which any excess has been allocated (the 'receiving sub-class') may, as a result of that allocation, itself reach its levy limit. In that case, the effect of FEES 6.5.2 R is that any resulting excess levy beyond the levy limit of the receiving sub-class is to be allocated amongst the remaining sub-classes whose levy limits have not been reached, to the exclusion of the receiving sub-class. This process is repeated until the compensation costs levy has been met in full or the general retail pool has been exhausted.

FEES 6.5.3

See Notes

handbook-rule
If a participant firm which is in default has carried on a regulated activity other than in accordance with a permission, the FSCS must allocate any compensation costs or specific costs arising out of that activity to the relevant sub-class 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 R.

FEES 6.5.4

See Notes

handbook-rule
If the relevant person in default is an appointed representative, the FSCS must allocate any compensation costs or specific costs arising out of a regulated activity for which his principal has not accepted responsibility to the relevant sub-class 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.

FEES 6.5.5

See Notes

handbook-rule
(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.
(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.

FEES 6.5.6

See Notes

handbook-rule
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:
(1) identifying each of the sub-classes to which each participant firm belongs, using the statement of business most recently supplied under FEES 6.5.13R (1);
(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);
(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) applying the proportion calculated in (3) to the figure in (2); and
(5) if more than one class or sub-class is relevant, adding together the figure in (4) for each sub-class.

Sub-classes and tariff bases for compensation cost levies and specific costs levies

FEES 6.5.7

See Notes

handbook-rule
When calculating a participant firm's share of a compensation costs levy or specific costs levy allocated to each sub-class the FSCS must use the sub-classes and tariff bases as set out in the table in FEES 6 Annex 3 R.
(1) [deleted]
(2) [deleted]
(3) [deleted]
(4) [deleted]
(5) [deleted]

FEES 6.5.8

See Notes

handbook-guidance
Guidance on parts of FEES 6 Annex 3 R can be found in FEES 6 Annex 4.

New participant firms

FEES 6.5.9

See Notes

handbook-rule
A firm 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.

Exclusion of new and exempt participant firms

FEES 6.5.12

See Notes

handbook-guidance
A participant firm may belong to more than one class, and more than one sub-class within the same class.

FEES 6.5.13

See Notes

handbook-rule
(1) Unless 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:
(a) sub-classes to which it belongs; and
(b) the total amount of business (measured in accordance with the appropriate tariff base or tariff bases) which it conducted, in respect of the firm's last financial year ended in the year to 31 December preceding the relevant year, or if appropriate to the tariff base, as at 31 December of the year immediately preceding the relevant year in relation to each of those sub-classes.
(2) In this rule the relevant year means the year in which the month of February referred to in (1) falls.
(3) This rule does not apply in relation to the home finance provision sub-class E1.

FEES 6.5.14

See Notes

handbook-rule
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.

FEES 6.5.15

See Notes

handbook-rule
Where a participant firm can identify that a protected deposit was made by a person who is not an eligible claimant, it may exclude the amount of that deposit from the tariff base, provided that it notifies the FSCS of the amount of the deposit so excluded and provides the FSCS with such information about the deposit as the FSCS may reasonably require.

FEES 6.5.16

See Notes

handbook-rule
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 2 Part 1 or FEES 5.4.1 R for the same financial year); and
(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.

FEES 6.6

Incoming EEA firms

FEES 6.6.1

See Notes

handbook-rule
If an incoming EEA firm, which is a BCD credit institution, an IMD insurance intermediary or MiFID investment firm, is a participant firm, the FSCS must give the firm such discount (if any) as is appropriate on the share of any levy it would otherwise be required to pay, taking account of the nature of the levy and the extent of the compensation coverage provided by the firm's Home State scheme.

FEES 6.7

Payment of levies

FEES 6.7.1

See Notes

handbook-rule
A participant firm must pay its share of any levy made by the FSCS:
(1) in one payment; or
(2) where the FSCS agrees, quarterly, at the beginning of each quarter, by direct debit agreement.

FEES 6.7.2

See Notes

handbook-guidance
The amount paid under a direct debit arrangement will be adjusted on a continuous basis to take account of interim levies and other adjustments made during the course of the financial year.

FEES 6.7.3

See Notes

handbook-rule
A participant firm's share of a levy to which FEES 6.7.1R (1) applies is due on, and payable within 30 days of, the date when the invoice is issued.

FEES 6.7.4

See Notes

handbook-rule
If a participant firm does not pay its share of a levy subject to a direct debit agreement as required by FEES 6.7.1R (2), the entire amount of the levy becomes due and payable to the FSCS, and additional administrative fees are payable at the rate set out in FEES 2.2.1 R.

FEES 6.7.5

See Notes

handbook-rule
A participant firm liable to pay its share of the levy under FEES 6.7.1 R must do so using one of the methods set out in FEES 4.2.4 R save that no additional amount or discount is applicable.

FEES 6.7.6

See Notes

handbook-rule
If a firm ceases to be a participant firm part way through a financial year of the compensation scheme:
(1) it will remain liable for any unpaid levies which the FSCS has already made on the firm;
(2) the FSCS may make a levy upon it (which may be before or after the firm has ceased to be a participant firm, but must be before it ceases to be an authorised person) for the costs which it would have been liable to pay had the FSCS made a levy on all participant firms at the time of the levy on the firm;
(3) the FSCS may make a levy upon the firm (which may be before or after the firm has ceased to be a participant firm, but must be before it ceases to be an authorised person) for the purpose of meeting its expenses expected to be incurred at any time in the future in respect of defaults which have already occurred;
(4) the FSCS may estimate any costs referred to in (3) by any method or approach it considers appropriate, and adjust them to reflect the time value of money based on the funding arrangements in place in relation to the default; and
(5) paragraphs (3) and (4) apply notwithstanding any other provision in this chapter.

FEES 6 Annex 1

Financial Services Compensation Scheme - Management Expenses Levy Limit

See Notes

handbook-rule

FEES 6 Annex 2

Financial Services Compensation Scheme - annual levy limits

See Notes

handbook-rule
This table belongs to FEES 6.3.5 R and FEES TP 2.5.2R

FEES 6 Annex 3

Financial Services Compensation Scheme - classes and sub-classes

See Notes

handbook-rule
This table belongs to FEES 6.5.7 R and FEES TP 2.5.2R

FEES 6 Annex 4

Guidance on the calculation of tariff bases

See Notes

handbook-guidance
This table belongs to FEES 6.5.8 G