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 the 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 appropriate regulator 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 6.1.4A

See Notes

handbook-guidance
Section 224F of the Act enables the appropriate regulator to make rules to enable the FSCS to impose levies on authorised persons (or any class of authorised persons) in order to meet its management expenses incurred if, under Part 15A of the Act, it is required by HM Treasury to act in relation to relevant schemes. But those rules must provide that the FSCS can impose a levy only if the FSCS has tried its best to obtain reimbursement of those expenses from the manager of the relevant scheme.

FEES 6.1.5

See Notes

handbook-guidance
The FSCS may impose three types of levy: a management expenses levy (consisting of a base costs levy and a specific costs levy), a compensation costs levy and a MERS levy. The FSCS has discretion as to the amount and timing of the levies imposed.

FEES 6.1.6

See Notes

handbook-guidance
In calculating a compensation costs levy, the FSCS:
(1) for claims for protected deposits, may include compensation costs expected in the 12-month period following the date of the levy; and
(2) for other protected claims, may include up to the greater of one third of the compensation costs expected in the 36-month period following the date of the levy, or the compensation costs expected in the 12 months following that date.

FEES 6.1.6A

See Notes

handbook-guidance
The total amount 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 R.

FEES 6.1.7

See Notes

handbook-guidance
In order to allocate a share of the amount of specific costs and compensation costs to be funded by an individual participant firm, the funding arrangements are split into twelve classes. These are the deposits class; the life and pensions provision class; the general insurance provision class; the investment provision class; the life and pensions intermediation class; the home finance intermediation class; the investment intermediation class and the general insurance intermediation class and the four FCA provider contribution classes (the deposit acceptor's contribution class; the insurers-life contribution class; the insurers - general contribution class; and the home finance providers and administrators' contribution class). The permissions held by a participant firm determine into which class, or classes, it falls.

FEES 6.1.8

See Notes

handbook-guidance
The provisions on the allocation of levies to classes up to their levy limits meet a requirement of section 213(5) of the Act that the appropriate regulator, 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 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;
(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;
(3) expenses incurred under section 214B or section 214D of the Act as a result of the FSCS being required by HM Treasury to make payments in connection with the exercise of the stabilisation power under Part 1 of the Banking Act 2009; and
(4) expenses incurred under Part XVA of the Act as a result of the FSCS being required by HM Treasury to act in relation to a relevant scheme.

FEES 6.1.10

See Notes

handbook-guidance
A management expenses levy 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 attributable to any specific class. 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 are attributable to a class, and include the salary costs of certain staff of the FSCS and claims handling and legal and other professional fees. 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 class (but below the levy limit for that class for the year). The specific costs are attributed to the class which is responsible for those costs. When the FSCS imposes a specific costs levy, the levy is allocated to the class which is responsible for those costs up to the relevant levy limits. 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 classes to which the FSCS has allocated specific costs. Each 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 limit on the management expenses attributable to the forthcoming financial year of the FSCS. will be consulted on in January each year.

The compensation costs levy

FEES 6.1.14

See Notes

handbook-guidance
In imposing a compensation costs levy in each financial year of the compensation scheme the FSCS will take into account the compensation costs which the FSCS has incurred and has not yet raised through levies, any recoveries it has had made using the rights that have been assigned to it or to which it is subrogated and a further amount calculated taking into account:
(1) for claims for protected deposits, those compensation costs it expects to incur (including in respect of defaults yet to be declared) in the 12 months following the date of the levy; and
(2) for other protected claims:
(a) the compensation costs it expects to incur in the 12 months following the date of the levy; or, if greater
(b) one third of the compensation costs it expects to incur in the 36 months following the date of the levy (see FEES 6.3.1 R (Imposing management expenses and compensation costs levies)).

FEES 6.1.15

See Notes

handbook-guidance

Compensation costs are principally the costs incurred in paying compensation. Costs incurred:

  1. (1) in securing continuity of long-term insurance; or
  2. (2) in safeguarding eligible claimants when insurers are in financial difficulties; or
  3. (3) in making payments or giving indemnities under COMP 11.2.3 R; or
  4. (4) as a result of the FSCS being required by HM Treasury to make payments in connection with the exercise of the stabilisation power under Part 1 of the Banking Act 2009; or
  5. (5) in paying interest, principal and other costs from borrowing to allow the FSCS to pay claims attributable to a particular class;

are also treated as compensation costs. Compensation costs are attributed to the class which is responsible for the costs. When the FSCS imposes a compensation costs levy the levy is allocated to the class which is responsible for the costs up to relevant levy limits. Certain classes may be funded, for compensation costs levies beyond the class levy limit, by the retail pool.

Participant firms that are members of more than one class

FEES 6.1.16

See Notes

handbook-guidance

If a participant firm is a member of more than one class, the total compensation costs levy and specific costs levy for that firm in a particular year will be the aggregate of the individual levies calculated for the firm in respect of each of the classes for that year. Each class has a levy limit which is the maximum amount of compensation costs and specific costs which may be allocated to a particular class in a financial year for the purposes of a levy.

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 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 6.2.4

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

Imposing management expenses and compensation costs 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 expenditure already incurred, actual and expected recoveries and:
(1) in the case of a management expenses levy, the level of the FSCS's expected expenditure in respect of those expenses in the financial year of the compensation scheme in relation to which the levy is imposed;
(2) in the case of a compensation costs levy relating to claims for protected deposits, the level of the FSCS's expected expenditure in respect of compensation costs in the 12 months immediately following the levy; and
(3) in the case of a compensation costs levy relating to other protected claims,
(a) the FSCS's expenditure in respect of compensation costs expected in the 12 months following the levy; or, if greater
(b) one third of the FSCS's expenditure in respect of compensation costs expected in the 36 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 6.3.2A

See Notes

handbook-guidance
The FSCS will usually levy once in each financial year (and in respect of compensation costs, for expenditure expected in the period of 12 months or, if greater, one third of the expenditure expected in the period of 36 months following 1 July in that year). However, if the compensation costs or specific costs incurred, or expected to be incurred, exceed the amounts held, or reasonably expected to be held, to meet those costs, the FSCS may, at any time during the financial year, do one or more of the following:
(1) impose an interim compensation costs levy or management expenses levy; or
(2) utilise other sources of funding such as commercial borrowing or other borrowing including from the National Loans Fund; or
(3) utilise money collected from firms as set out in, and subject to, FEES 6.3.17 R (Management of funds).
The FSCS will generally impose a levy rather than borrow or utilise funds as described in (3), unless the latter options appear to it to be preferable in the specific circumstances prevailing at the relevant time; for example, to address short-term liquidity issues, or in order to deal with a significant failure without having to wait for a levy to be imposed or collected.

FEES 6.3.3

See Notes

handbook-guidance
The FSCS has committed itself in Memorandum of Understanding with each of the FCA and the PRA to publish its policy in respect of levying.

FEES 6.3.4

See Notes

handbook-guidance
The discretion over levying in FEES 6 also gives the FSCS, if it thinks this appropriate, the ability to use third parties as its agents in raising and collecting the levies.

Imposing a MERS levy

FEES 6.3.4A

See Notes

handbook-rule
The FSCS may at any time impose a MERS 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 relevant expenses incurred or expected to be incurred in the 12 months following the date of the levy.

Limits on compensation costs and specific costs levies on classes

FEES 6.3.5

See Notes

handbook-rule
The maximum aggregate amount of compensation costs and specific costs for which the FSCS can levy each 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 not made in bad 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 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 class must be credited to that class, and must be set off against the management expenses or compensation costs allocated to that class.

FEES 6.3.14

See Notes

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

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 or specific costs attributable or allocated by way of levy 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 levy allocation in FEES 6.4, 6.5 and 6.5A.

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 classes to which the related compensation costs was attributable.

FEES 6.3.20

See Notes

handbook-rule
  1. (1) Where the FSCS makes recoveries in relation to protected claims where a related compensation costs levy would have been allocated to a class (class A) had the levy limit for class A not been reached and has been allocated to another class or classes in the retail pool, the recoveries must be applied:
    1. (a) first, to the classes to which the costs levied were allocated in accordance with FEES 6.5A in the same proportion as those classes contributed, up to the total amount of that allocation plus interest at a rate equivalent to the Bank of England's Official Bank Rate from time to time in force; and
    2. (b) thereafter, to class A.
  2. (2) This rule applies even though the recovery is made in a subsequent financial year.
  3. (3) [deleted]

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 (whether from levies, recoveries or otherwise) to the credit of a class than the FSCS believes will be required to meet levies on that class for the next 12 months, it may refund the surplus to members or former members of the 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 2.3 (Relieving Provisions), 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.

FEES 6.3.22A

See Notes

handbook-rule
The FSCS may not adjust the calculation of a participant firm's share of any levy under FEES 6.3.22 R on the grounds that it would be inequitable for that firm to pay that share or part of it or on the grounds that it would be inequitable for the FSCS to retain that share or part of it.

FEES 6.3.22B

See Notes

handbook-guidance
The reason for FEES 6.3.22A R is that any such claim should be dealt with under FEES 2.3 (Relieving Provisions).

Firms acquiring businesses from other firms

FEES 6.3.22C

See Notes

handbook-rule
(1) This rule applies to the calculation of the levies of a firm (A) if:
(a) either:
(i) A acquires all or a part of the business of another firm (B), whether by merger, acquisition of goodwill or otherwise; or
(ii) A became authorised as a result of B's simple change of legal status (as defined in FEES 3 Annex 1 Part 6);
(b) B is no longer liable to pay a levy; and
(c) that acquisition or change takes place after the date to which, or as of which, A's most recent statement of business under FEES 6.5.13 R is drawn up so far as concerns the classes covered by B's business.
(2) A must pay an additional amount equal to the levy that would have been payable by B in relation to the relevant business and relevant classes if the acquisition or change in status had not taken place and B had remained liable to pay levies. The amount is based on the most recent information supplied by B under FEES 6.5.13 R. A is included in the classes applicable to the relevant business.
(3) This rule only applies with respect to those financial years of the FSCS for which A's levies are calculated on the basis of a statement of business under FEES 6.5.13 R drawn up to a date, or as of a date, before the acquisition or change in legal status took place.

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

Subject to FEES 6.3.22 R, 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 and:
    1. (a) allocating 50% of those base costs as the sum to be levied on participants in activity groups A.1, A.3, A.4, A.5 and A.6 (as listed in FEES 4 Annex 1B); and
    2. (b) allocating 50% of those base costs as the sum to be levied on participants in all the activity groups listed in FEES 4 Annex 1A;
  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:
    1. (a) if the participant firm belongs to any of the activity groups in (1)(a), imposed by the PRA in respect of those groups; and
    2. (b) if the participant firm belongs to any of the activity groups in (1)(b), imposed by the FCA in respect of those groups; and
  3. (3) applying the proportion calculated in (2)(a), if any to the sum in (1)(a), and the proportion calculated in (2)(b) (if any) to the sum in (1)(b).

FEES 6.4.5A

See Notes

handbook-guidance
The effect of FEES 6.4.5 R is that if a participant firm belongs to activity groups in both (1)(a) and (1)(b) of that rule, it will be required to pay a share of the base costs levy in respect of both sets of activity groups.

Specific costs levy

FEES 6.4.6

See Notes

handbook-rule
The FSCS must allocate any specific costs levy amongst the relevant classes in proportion to the amount of relevant costs arising from the different activities for which firms in those classes have permission up to the levy limit of each relevant class.

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 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 classes identified in (1), but not yet levied;
(3) calculating, in relation to each relevant class FF, the participant firm's tariff base (see FEES 6 Annex 3) 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;
(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.

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 FEES 6 for discounts on the base costs levy.

Specific costs levy for newly authorised firms

FEES 6.4.10A

See Notes

handbook-rule
(1) This rule deals with the calculation of:
(a) a participant firm's specific costs levy in the financial year of the FSCS following the FSCS financial year in which it became a participant firm; or
(b) a participant firm's specific costs levy in the financial year of the FSCS in which it had its permission extended, and the following FSCS financial year; and
(c) the tariff base for the classes that relate to the relevant permissions or extensions, as the case may be.
(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) 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.
(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.
(b) If a participant firm satisfies the following conditions it must calculate its tariff base under (c) for the FSCS financial year following the FSCS financial year it became a participant firm:
(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
(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 FSCS financial year.
(c) If a participant firm satisfies the conditions in (b) it must calculate its tariff base as follows:
(i) it must use actual data in relation to the business to which the tariff relates rather than projected valuations;
(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 FSCS financial year; and
(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.
(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 6.5.13 R (Reporting Requirements).
(e) Where a participant firm is required to use actual data under this rule FEES 6 Annex 3 R 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.

Application of FEES 6.4.10AR

FEES 6.4.10B

See Notes

handbook-guidance
The table below sets out the period within which a participant firm's tariff base is calculated ("the data period") for second year levies calculated under FEES 6.4.10B. The example is based on a participant firm that extends its permission on 1 November 2009 and has a financial year ending 31 March.

References in this table to dates or months are references to the latest one occurring before the start of the FSCS financial year unless otherwise stated.

FEES 6.4A

Management expenses in respect of relevant schemes

Obligation on participant firm to pay

FEES 6.4A.1

See Notes

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

Restriction on management expenses in respect of relevant schemes

FEES 6.4A.2

See Notes

handbook-rule
The FSCS can impose a MERS levy only if the FSCS has tried its best and has failed to obtain reimbursement of those expenses from the manager of the relevant compensation scheme.

Management expenses in respect of relevant schemes levy

FEES 6.4A.3

See Notes

handbook-rule
The FSCS must calculate a participant firm's share of a MERS levy on a reasonable basis.

FEES 6.5

Compensation costs

FEES 6.5.2

See Notes

handbook-rule

The FSCS must allocate any compensation costs levy:

  1. (1) 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.
  2. (2) [deleted]

Allocation: all classes except A, B and C

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 attribution of compensation costs, nor the allocation of compensation cost levies; the allocation of a compensation costs levy occurs at the time that the FSCS imposes a levy.

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 treat any compensation costs or specific costs arising out of that activity as if the relevant permission were held by the participant firm.

FEES 6.5.4

See Notes

handbook-rule
If the relevant person in default is an appointed representative, the FSCS must treat 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.

FEES 6.5.5

See Notes

handbook-rule
(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 member 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) [deleted]

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 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 classes identified in (1);
(3) calculating, in relation to each relevant class, the participant firm's tariff base (see FEES 6 Annex 3) 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;
(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.

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 class the FSCS must use the 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.

Compensation costs levy for newly authorised firms

FEES 6.5.9A

See Notes

handbook-rule
FEES 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.

FEES 6.5.9B

See Notes

handbook-guidance
The 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 classes

FEES 6.5.12

See Notes

handbook-guidance
A participant firm may belong to more than one class.

Reporting requirements

FEES 6.5.13

See Notes

handbook-rule
(1) Unless exempt under FEES 6.2.1 R or FEES 6.2.1A 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 appropriate regulator) with a statement of:
(a) 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 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 classes.
(2) In this rule the relevant year means the year in which the month of February referred to in (1) falls.
(3) [deleted]

FEES 6.5.13A

See Notes

handbook-guidance
For example, when the tariff base for a particular class is based on a firm's annual eligible income the valuation period for that class 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 class A1 (Deposits) its valuation period will be 31 December.

FEES 6.5.14

See Notes

handbook-rule
If 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.

FEES 6.5.15

See Notes

handbook-rule
Where a participant firm can identify that a protected deposit or a protected dormant account was made by or belonged to a person who is not an eligible claimant, it may exclude the amount of that deposit or that account from the tariff base, provided that it notifies the FSCS of the amount of the deposit or the account so excluded and provides the FSCS with such information about the deposit or account 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 Annex 2A, 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 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.

FEES 6.6

Incoming EEA firms

FEES 6.6.1

See Notes

handbook-rule
If an incoming EEA firm, which is a CRD 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 or carry out activities within one or more classes 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; and
(2) the FSCS may make one or more levies upon it (which may be before or after the firm has ceased to be a participant firm or carry out activities within one or more classes, 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 or firms carrying out activities within that class in the financial year it ceased to be a participant firm or carry out activities within that class.
(3) [deleted]
(4) [deleted]
(5) [deleted]

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