Financial Services Compensation Scheme Guidance Notes/FAQ’s

Exemption Notice

FSCS exemption FCA fees helpline – 0845 606 9966 Email – feetariffreturns@fca.org.uk

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• What is the FSCS?

The Financial Services Compensation Scheme (FSCS) covers claims against firms where they are unable, or likely to be unable, to pay claims against them. In general this is when a firm is insolvent. The FSCS can compensate consumers of authorised financial services firms under the Act (or any participating EEA firm) and covers deposits, insurance policies, insurance broking (for business on or after 14 January 2005), investment business, and mortgage advice and arranging (for business on or after 31 October 2004).

• Why must I send the exemption notice to the FCA and not the FSCS?

We act as the FSCS’s agent to collect relevant data, raise and issue the levy invoices and collect all payments due on its behalf. This is to avoid duplication and reduce costs.

• What FCA/FSCS rules apply to the exemption notice?

• The FSCS levy rules are set out in the FEES section of our FCA Handbook of rules and guidance.

• I have previously applied for exemption. How do I know if I am still exempt?

• An exemption notice under FEES 6.2.1R rolls over each year so you not need to renew it every 12 months. Your fee tariff data sheets and covering letter gives details of your current exemption status. Contact your supervisor if you have any queries on this.

• How do I know if I am exempt?

A participant firm that 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. This is as long as it has notified the FSCS in writing that those conditions apply and will continue to apply, or by completing the exemption notice. Firms that have submitted valid exemptions (under FEES 6.2.1R) will be excluded from specific and compensation costs levies, but will remain liable for a share of base cost levies. The exemption will take effect from the date that the notice is received by the FSCS. We must receive your notice of exemption by 31 March to take effect for the following and future levy year.

• What is a participant firm? (1) (1) (except in 36 FEES 1 and 37, 38FEES 636 ) a firm or a member 39 other than: (a) (in accordance with section 213(10) of the Act (The compensation scheme) and regulation 2 of the Electing Participants Regulations (Persons not to be regarded as relevant persons) an incoming EEA firm which is: (i) a credit institution ; (ii) 37a MiFID investment firm37 ; or (iii)39, 40 [deleted]40 (iv) both (i) and (ii); or39 (v) an IMD insurance intermediary or an IMD reinsurance intermediary which is neither (i) or (ii);39 41(vi) an AIFM managing an unauthorised AIF or providing the services in article 6(4) of AIFMD; in relation to its passported activities, unless it has top-up cover;40 (aa) (in accordance with section 213(10) of the Act (The compensation scheme) and regulation 2 of the Electing Participants Regulations (Persons not to be regarded as relevant persons) an incoming EEA firm which is a management company other than to the extent that it carries on the

Financial Services Compensation Scheme Guidance Notes/FAQ’s

Exemption Notice

FSCS exemption FCA fees helpline – 0845 606 9966 Email – feetariffreturns@fca.org.uk

Page 2 of 2

following activities from a branch in the United Kingdom or under the freedom to provide cross border services:40 (i) collective portfolio management for a UCITS scheme; or40 (ii) managing investments (other than of a collective investment scheme), advising on investments or safeguarding and administering investments (the services referred to in article 6(3) of the UCITS Directive), but only if it has top-up cover;40 (b) a service company; (c) [deleted] (d) [deleted] (e) an underwriting agent , or members' adviser , in respect of advising on syndicate participation at Lloyd's or managing the underwriting capacity of a Lloyd's syndicate as a managing agent at Lloyd's; (f) an authorised professional firm that is subject to the rules of the Law Society (England and Wales) or the Law Society of Scotland and with respect to its regulated activities participates in the relevant society's compensation scheme;42 (g) an ICVC; (h) a UCITS qualifier; (i) 43, 44[deleted]43, 44 45(j) in respect of the carrying on of bidding in emissions auctions, a firm that is exempt from MiFID under article 2(1)(i). 41(k) an AIFM qualifier. (2) (in 36 FEES 1 and38 FEES 636 ) a firm specified in paragraph (1) above that is not a member

• What happens if during the year I find that I no longer qualify for exemption?

A participant firm that is exempt under FEES 6.2.1R must notify the FSCS in writing as soon as reasonably practical if the conditions in FEES 6.2.1R no longer apply. The firm will then become subject to Fees 6.3. 6.5 6.7

• I do not qualify for exemption. What information do I need to supply?

A participant firm must provide the FSCS by the end of February each year with a statement of: 1. the contribution groups to which it belongs; and 2. the total amount of business (measured in line with the appropriate tariff base or

bases) which it conducted, as at 31 December of the previous year, in relation to each of those contribution groups.

These statements (Fee tariff requests) are available for completion on the web by FSA fee block. (Our fees web page includes details about tariff data following the changes to the funding model of the Financial Services Compensation Scheme.

• What makes up the FSCS levy?

The FSCS levy is made up of two elements:

• management expenses; and

• compensation costs.

Management expenses levy – cover the costs of running the compensation scheme. The management expenses levy is made up of base costs (operating costs not directly related to the payment of compensation), and specific costs (operating costs that are directly related to the payment of compensation arising from valid claims).

Compensation costs levy – provides the funds to make valid compensation payments.

All firms are required to contribute to base costs.