Fees and Levies

The FSA has published its annual consultation paper on fee rates and levies – ‘Regulatory fees and levies: policy proposals for 2013/14’ (CP12/28). At this stage of the process the paper concerns itself with policy changes; it will not be until around April next year when fee rates etc. will be consulted on – presumably then by the PRA and FCA; legal cutover is expected to be 1 April 2013.

The paper introduces the PRA and FCA fee-blocks, as well as allocating the cost of funding the FSA legacy defined pension deficit. The FSA’s plans for the latter were to reduce the deficit to nil over the ten-year period to 31 March 2011; the FSA contributed £19.5m to the reduction of this deficit for 2012/13.

The PRA and FCA will, of course, recover their annual funding requirements through their respective fee-blocks, with dual-regulated firms contributing to both. There will be a PRA transition costs fee-block introduced through which the accumulated regulatory reform costs of the Bank of England will be recovered over a number of years; there will be an exemption for any small firms that will only pay the PRA minimum fee (the FSA’s current minimum fee of £1,000 will be split between the PRA and FCA for dual-regulated firms). Solo-regulated firms that are FCA regulated for prudential, as well as conduct, purposes will find that there will be an additional fee-block (AP.0) to meet the costs of FCA prudential regulation costs (meaning that the costs allocated to other fee-blocks will only relate to conduct regulation). There will also be an exemption for small firms.

As mentioned in Regulatory Roundup 42, the paper confirms that financial penalties, net of enforcement costs, will no longer be available to offset against future fees requirement and instead will have to be remitted to HM Treasury.

Regulatory Roundup 39 advised that the proposed change to the tariff base (from CF30 basis to income basis) for ‘Advisory arrangers, dealers or brokers’ (fee-blocks A.12 and A.13 depending on whether or not holding or controlling client money/assets) and ‘Corporate finance advisers'(fee-block A.14) was put on hold whilst the FSA undertook a further impact assessment. Chapter 6 of CP12/28 confirms that the move to an income basis for these three fee-blocks will be implemented for the 2013/14 fee-year. The income threshold for the minimum fee above which periodic fees become payable will be £100,000.

We would remind firms that currently fall into both fee-block A.7 (fund managers) and fee-block A.12/A.13 (advisory arrangers etc.) that to avoid double-counting the correct approach was to exclude those CF30s that acted solely in the capacity of an investment manager (see FEES 4 Annex 1, Part 2). This concept will be carried over to the definition of ‘annual income’ for the purposes of these three fee-blocks; see s6.8 of CP12/28 and s4.52 of Handbook Notice 118 – a link to the latter can be found in Regulatory Roundup 39.

Comments are invited by 7 January 2013.

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