Details on regulatory fees and levy proposals for the Financial Conduct Authority's (FCA) funding for 2023/24 have been published today (29 November) with the regulator now seeking feedback from the industry on a range of proposals.

In a consultation opened today the regulator said it was "mindful of the significant inflationary pressures on businesses in the current climate".

"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," it added.

The regulator said it would take the December 2022 Consumer Prices Index (CPI) as a fixed measure and benchmark all estimated costs for 2023/24 against it.

"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," it added.

The regulator said the minimum and flat-rate fee freeze imposed during the pandemic to support the firms which pay only its minimal levy of fees is back on the cards for 2023/24. Application fees for firms applying for authorisation also will not be increased, it proposed, despite assertions earlier this year that an annual rise could be expected.

Revenue for the regulator from application fees recover around 1.5% of the FCA's total costs.

"In 2021/22, the cost of our authorisations division was £33.9m," the FCA stated. "This excludes associated costs such as legal advice and systems. The revenue from application fees in 2021/22 was £6.8m, or about 20% of the cost our authorisations division incurred.

"We expect the revenue to be about £9m in 2022/23 under the new pricing structure."

Fees for principal firms of ARs

The current charges for each appointed representative (AR) that principal firms have registered with the FCA will be maintained for 2023/24, the regulator has proposed.

The FCA said the current levels meet its anticipated funding requirements, but that a review would take place again when it consulted on the rates for 2024/25.

The flat-rate charges for ARs introduced in 2021/22 covers the FCA's establishment of a new department to conduct "enhanced supervision" of principal firms as well as publishing and enforcing new rules.

"We are monitoring the funding needs of our continuing work on ARs and the most appropriate manner to recoup our costs," the consultation paper stated.

Consumer Duty funding

In order to fund all the worked needed around the implementation of Consumer Duty, the FCA has proposed it recover the costs from the A, consumer credit and claims management feeblocks, collective investment schemes (fee-block C), payment services, e-money and consumer buy-to-let firms in fee-blocks G3, G4, G5, G10, G11, G20 and G21 and trade and securitisation repositories in fee-blocks J2 and J3.

Respondents have been asked for their feedback on this, with the FCA saying it recognises some firms in the aforementioned fee-blocks "may be less likely to be in the scope of Consumer Duty than others".

"While we are consulting on recovering costs from a wide range of firms, we welcome views on whether - and, if so, how - this approach should be refined."

Consultation expected post IFPR

The FCA confirmed it received only two responses to questions laid out last November regarding its calculation of fees for firms dealing in investments under the Investment Firms Prudential Regime (IFPR) that was introduced at the start of the year.

The two fee-blocks for Markets in Financial Instruments Directive (Mifid) and non-Mifid trading firms have since caused confusion.

"We agree that these are issues which need to be discussed in greater depth with industry practitioners, and welcomed the suggestion that we should hold workshops with affected firms," the consultation reads. "We will consider options for further discussion with firms on the detail early in 2023, with a view to developing proposals for consultation in the autumn 2023 fees policy consultation paper."

The regulator said changes in the measures will not affect the amount it recover through fees, however.

"We would expect the distribution of cost recovery between firms to change if we redefine tariff measures or introduce new ones," it noted. "Some will pay more and some less, depending on their size - however measured.

"Our next step will be to engage in further discussion with trade bodies and the industry and present proposals for consultation in Autumn 2023."

Pensions dashboards

The FCA gas proposed that its A4 fee block - life insurers and some pension providers - as well as fund managers and providers in A9 and advisers, dealers, brokers and arrangers that make up A13 will shoulder dashboards costs.

The long-awaited connections to the pensions dashboard are expected next year, with the FCA confirming it anticipates public use could drive demand for advice.

Financial promotions

The consultation also includes the FCA's proposal for a £5,000 application fee as a contribution towards the costs of processing applications to add new financial promotions products.

It comes as - subject to parliamentary approval - the Financial Services and Markets Bill will see an amendment to the Financial Services and Markets Act 2000 (FSMA) preventing firms from undertaking financial promotions on behalf of unauthorised firms. 

"Authorised firms will have to apply to the FCA for permission under the new section 55NA of the FSMA to approve financial promotions of types of products," it explained. "We are recovering £2.4m project costs in 2022/23, spread across the full population of fee-payers.

"We expect to consult shortly on the proposed regulatory regime."

The consultation will close to responses on 16 January with a policy statement expected to follow in March or April.