For those unaware, the Financial Conduct Authority (FCA) does not receive any government monetary support but rather survives off the fees levied off regulated firms. Application fees, fines and annual fees calculated by firm submissions on the Regdata system (formerly GABRIEL) all cover the FCA’s operational costs.
Despite this, the FCA has released consultation paper: CP20/22 in November last year. Relatively under the radar, the FCA is seeking responses from regulated firms on its proposals to raise and restructure its price tags. Broadly, the FCA is looking to increase fees throughout most permission scopes citing inflation and increasing operational costs as the reason for the ‘price hike’. Interestingly, the FCA is focusing on raising application fees more so than existing annual fees as it recognises this will allow firms already trading who have been affected by the pandemic to not suffer further.
The fees increase is in ‘the consultation stage’ where firms can offer responses to the paper and answer the questions within it posed by the FCA. These changes will not really affect existing regulated firms unless Variation of Permissions (VOP) applications are undertaken (which are proposed to be calculated at 50% of the initial fee of the sought after permission) or regulated firms who submit applications for new Approved Persons under the Senior Managers & Certification regime where a fee of £250 will be charged (previously this was free). However, this does present a troubling barrier for markets access for new firms if finalised.
For example Claims Management Companies (CMC) application fees under the current model are calculated on the projected income of the applicant firm. This is set to change to category 6 £10,000 fee irrespective of the regulated income projected, CMCs who will only lead generate and market for claims will all be expected to pay Category 4 £2,500 regardless of income which is also a large increase from its previous cost (108% increase). This could mean smaller firms are out of pocket more severely for applying to the FCA under these new proposals, perhaps this is intended by the FCA as a way to limit its workload.
Another example which is less affected but still set to become more expensive is Mortgage Broking and Insurance Broking applications. Originally a flat £1,500 is also set to increase to Category 4 £2,500. There are some winners however which are set to potentially get cheaper application fees. Consumer Credit Broking applications (depending on complexity) are set to be streamlined and no longer be calculated on income. Full authorisation Credit Broking, at present, is anywhere between £600 – £5000 depending on the income figure submitted. Under the new proposals this will be a Category 3 application of only £1000 irrespective of income.
The general trend by the FCA for these proposals are to remove income dependent fee calculations and streamline the whole fee structure. There is a maximum of 10 categories which arguably does make the fee structure far more straightforward than what firms have to experience now. Despite all this, the new proposals look to set up further barriers for certain firms such as the FCA’s area of focus, CMCs.
If you are a firm looking to set up and gain an FCA authorisation and you are part of a category which is set rise in price, it may be worth submitting your application sooner rather than later. The FCA’s timetable for finalisation is not until June/July of 2021 however, these applications take time so do not waste this opportunity before fees increase. Scott Robert can help with the application process contact us further, for more information on how we can submit your application before the fees inevitably change.
Alternatively, the FCA is welcoming responses from regulated firms, click here for FCA paper: CP 20/22 for your chance to review the changes and give your feedback. Feedback closes on January 22nd.