Financial Conduct Authority  

FCA to charge for SMCR changes and hike new firm fees

FCA to charge for SMCR changes and hike new firm fees

The Financial Conduct Authority is set to begin charging for personnel changes under the Senior Managers Certification Regime and increase fees paid by newly-authorised firms. 

In a consultation paper published today (November 19) the regulator proposed to increase the application fees paid by new businesses seeking its authorisation, something which it last reviewed in 2014. 

The FCA proposed to increase fees for straightforward applications from £1,500 to £2,500, and for moderately complex ones from £5,000 to £10,000.

Despite concerns from some that increasing these fees would act as a barrier to market entry, the FCA said today it would help “redress the balance of cost recovery” away from existing fee-payers. 

It said its processing cost ranged from £2,450 on average for straightforward cases to £6,750 on average for more complex ones.

In 2019 the total cost of authorisations at the City watchdog was £19m, but application fees only covered 33 per cent of this cost with revenues of £6.2m. 

The FCA said its latest proposals, if implemented last year, would have seen funds from application fees increase to £12.8m in that same year, covering 67 per cent of the cost - an increase in fee rates of 103 per cent. 

But the regulator warned its proposals to increase application fees would still not recover the full cost of processing applications, and last year would still have seen some 20 per cent of the bill passed to existing fee-payers through periodic fees.

As a result the FCA also proposed introducing fees for changes in control and applications under the SMCR.

The FCA said: “When firms request our services after they are authorised, we believe it is reasonable to seek a contribution from them to reduce the costs recovered from existing fee-payers.” 

There is currently no charge for a business which submits to the FCA to gain or extend its control over an authorised person.

The regulator said the majority of CiCs were “relatively simple” with an average cost to the FCA of about £740.

It predicted its proposals to introduce a fee for this activity would generate approximately £800,000 a year for an estimated 1,600 applications. 

The FCA has also proposed charging firms for changes made to personnel under the SMCR. 

The regulator said: “When the SMCR was introduced in 2016, all the firms affected had to submit applications to us and so we shared cost recovery between all the fee-payers in the relevant feeblocks.

“The SMR project costs will be paid off by the end of 2020/21, so from 2021/22 onwards we propose to charge firms as they apply

“Some SMR applications can involve a considerable amount of work, including interviews with key individuals. 

“But on average they take a few hours, so a pricing category 1 charge of £250 would be appropriate.”

The FCA said approximately 8,000 applications would generate revenue of about £2m, and the charge would also apply to principal firms applying on behalf of appointed representatives.

CMC fees

The regulator is also looking to introduce a £2,500 fee for claims management companies (CMCs) that only apply for permission to seek out people who may want to make a claim.