The FSA has published consultation paper CP04/4...
The FSA has published consultation paper CP04/4, outlining how brokers will fund the Financial Ombudsman Service (FOS) and the Financial Services Compensation Scheme (FSCS).
The proposals are based on the existing rules which will be extended to cover mortgage firms and general insurance intermediaries.
For funding the FOS, the consultation paper proposes to:
· Create two new industry funding blocks for the mortgage and general insurance businesses.
· Each funding block will have a tariff base which will be the measure used to calculate each firm’s chare of any general levy. The tariff base will be based on the same “annual income” measure as used for FSA fees.
· The FSA will not be charging mortgage and general insurance firms for the 2004/05 financial year. Instead firms will pay a special case fee of £550 per case, with the first two cases not subject to a fee.
The FSA said it recognised that some firm’s annual income may include only a relatively small proportion of business that would ever generate eligible complaints for the FOS, and would be contributing disproportionate amounts.
Such firms will have the option of reporting their annual income from relevant business, which would give a much closer match between the tariff base and the potential impact on the relevant firms, said the FSA.
For funding the FSCS, the FSA proposes to:
· Create two sub schemes for mortgage and general insurance broking
· It will make two types of levy on participant firms; one for management costs which will cover operating costs, and one for compensation costs for when a firm goes into default.
· The FSA said the compensation levy would operate on a ‘pay as you go’ basis, with no levy made if there are no failures in, or expected to be in, the contributing firms.
· For mortgage firms and general insurance intermediaries the tariff base will be the same “annual income” measure as used for FSA fees. As with the arrangements for contributions to the FOS, firms will have the option of reporting their annual income from relevant business only.
· The management expenses will not be collected until the 2005/06 financial year. Invoices for that year will include cover for that year as well as the period from the start of regulation to 31 March 2005, said the FSA.
The full consultation paper is available from the FSA website.
