FSCS Interim Levy

We are aware that several of our clients have been left reeling following receipt of an FSCS 2010/11 Interim levy request for further payment. The additional levy is to meet the costs of claims by consumers, chiefly in respect of Keydata Investment Services Ltd – it accounts for costs of £247m out of a total interim levy of £326m.

The costs are to be borne by FSCS ‘Sub-Class’ SD01 (Investments – fund management) and SD02 (Investments – intermediation). Because of the way that thresholds work, only £93m can be raised against ‘intermediation’ with the balance of £233m falling to ‘fund management’ (and payable within 30 days).

Firms that are FSCS exempt should not be subject to this interim levy. Although all firms are subject to pay an FSCS base cost, firms that do not undertake business that could give rise to a ‘protected claim by an eligible claimant’ can apply for exemption. It is important to differentiate between ‘eligible claimant’ which relates to the FSCS and is covered in COMP 4.2 and ‘eligible complainant’ which relates to FOS and is covered in DISP 2.7. It can be tortuous cross-referencing the various rules and definitions in the handbook but a high level summary would be that a professional client or eligible counterparty will not be an eligible complainant (DISP 2.7.9) but they could be an eligible claimant. The latter does not depend upon the client categorisation. COMP 4.2 (see ‘Eligible Claimant’ link) doesn’t tell us what is an eligible claimant but rather tells us what is not an eligible complainant e.g. an authorised person or a large company will not qualify as an eligible complainant.

Any necessary exemptions from FSCS (and FOS) should have been dealt with at the authorisation stage. However a firm’s business developments over the years may mean that whilst a firm was previously exempt, this is no longer the case (and vice versa). Although Complyport clients will already have the need to consider the relevance of any FOS/FSCS exemptions incorporated in any compliance monitoring programme that we have been asked to assist in implementing, firms may wish to give consideration to their FSCS status.

As you may be aware (e.g. see the link in Regulatory Roundup 23), the FSA provide a fees calculator which ordinarily allows firms to calculate/check their FSA/FSCS fees. Unfortunately, according to the website, it cannot be used for this levy.