The Financial Conduct Authority is to lift its freeze on fees next year as the regulator says it is facing higher costs.
The regulator has held down minimum, flat rate and application fees this year, but said it expects to return to inflationary and staged increases from next year.
In its final fees and levies policy statement published today (July 7), the FCA said it is "conscious" of the overall cost of regulation and is seeking to manage its resources effectively.
“However, we are – like all organisations – facing higher costs…we have an expanding remit and require resource[s] to manage, among other things, the policy implications of transferring retained EU law into our handbook,” the regulator added.
“These increase the resources needed to manage ongoing activity.”
The FCA’s overall annual fee requirement (AFR) for the 2023/24 year has been reduced by £2.5mn to £681.8mn, with the majority of the savings (£1.6mn) being credit to claims management companies as the final cost of bringing CMCs under the FCA’s regulatory umbrella was lower than anticipated by the Ministry of Justice.
A further £900,000 was credited across all fee-blocks who contributed to the recovery of project costs for the introductions of the senior managers and certification regime, which came in below budget.
The impact on each fee-block is small.
Smaller firms
The FCA pushed back on an IFA’s suggestion that firms with turnover of under £100,000 with only one registered individual should be removed from FCA regulation and should be brought into a system of self-regulation.
The IFA also made suggestions around reducing data requirements for small firms.
The FCA said its minimum fee structure already protects smaller fee-payers, and although minimum fees have been frozen this year, its objective remains to align them with the minimum cost of being regulated, which the regulator said it believes would establish a reasonable balance.
It added that it does not agree that it should reduce smaller firms’ regulatory requirements.
“The majority of claims under the Financial Services Compensation Scheme (FSCS) come from relatively small firms,” the FCA said.
Larger firms saw their fees increase 5.9 per cent due to higher incomes being reported and the number of firms within the sector.
Smaller adviser firms will only pay the minimum fee which, for this year, the FCA has proposed to freeze at last year’s rate of £1,500.
sally.hickey@ft.com
