In April, the FCA proposed to hike its AFR for advisers by 5.2 per cent, from £82.3mn to £86.5mn.
The regulator said in its fee proposal document that its overall AFR is estimated to go up by £26.4mn in 2022/23, an increase of 4.3 per cent from £613.7mn in 2021/22 to £640.1mn.
However, in its feedback statement later in June, the FCA reduced the overall AFR for 2022/23 from the proposed £640mn to £630.9mn.
“We recover the AFR by distributing it across fee-blocks which group together firms with similar permissions,” the FCA said.
“This ensures that their fees reflect the different regulated activities they undertake. Many firms fall into more than one fee-block because they hold a variety of permissions.”
The FCA put this change in funding requirement down to a mixture of ongoing regulatory activities (£611.3mn) - ie, the baseline cost of running the FCA, as well as new responsibilities (£3mn), “scope change[s]” (£10.4mn), and National Insurance rate increases (£3.1mn).
The greater part of the AFR is taken up by the ongoing regulatory activities budget which represents the standard cost of running the FCA – in addition to the direct costs of supervision, it includes the costs of common services such as finance, IT and human resources, legal department, routine policy development, accommodation and equipment.
The Ora budget in 2022/23 is £617.4mn – 98 per cent of the AFR.
“We are committed to keeping Ora flat in real terms and therefore limit its annual increase to the consumer price index (CPI),”it said.
“Although the CPI is currently substantially elevated, we are determined to manage the rise in FCA costs as far as feasible over the coming year to ease the pressure on fees, particularly for smaller firms.
“We propose to take the December 2022 CPI as a fixed measure and benchmark our estimated costs against it.”
It added: “We are giving due consideration to inflationary pressures as we finalise our budget for 2023/24 and do not expect it to reflect the full increase in inflation as measured by the CPI, but we are not in a position to give an indicative figure at this stage.”
Fees for principal firms of ARs
In 2021/22, the FCA introduced flat-rate charges for each appointed representative (AR) that principal firms have registered.
The revenue raised contributes towards the work it is undertaking to tackle the harm caused by ARs.
The FCA said this work includes setting up a new department to conduct enhanced supervision of principal firms, publishing and enforcing new rules for principal firms, and strengthening the authorisations gateway.
“We are monitoring the funding needs of our continuing work on ARs and the most appropriate manner to recoup our costs,” it said.
“The current charges meet our anticipated funding requirements, so we propose to maintain them for 2023/24.
