Firms which cancel their regulatory permissions part-way through the year will only be charged pro-rated fees, the Financial Conduct Authority (FCA) is proposing.
The regulator has put forward a quarterly pro-rating model which would see firms charged 25% of their annual fee for each financial quarter of the year they enter before cancelling permissions.
For example, a firm cancelling in the first quarter of the financial year from April to June would only pay 25% of its annual fee.
A July to September cancellation would cover 50% of fees, October to December would mean 75% of fees paid and submitting a cancellation in January to March would result in all fees being paid.
The FCA said that had the proposals been in place for the last two financial years it would have cost around £1.5m or 0.24% of its annual funding in 2023-24, and approximately £1m or 0.13% of annual funding in 2024-25.
If approved the changes would be made by 1 April 2027.
The regulator said following protestations from firms it had considered daily, monthly and quarterly pro-rating of annual fees for firms cancelling their permissions and decided this model was the most appropriate.
“Several firms have argued that their fees should be pro-rated, especially if they cancel in the earlier part of the year,” the FCA said.
“They argue that it is unreasonable for us to recover costs from them if we are not supervising them for much of the year.
“We consider quarterly pro-rating is the most cost-effective option. This is because most cancelling firms are minimum fee-payers.
“Pro-rating on a daily or monthly basis will have minimal benefit and require significant FCA resources to administer,” it added.
The regulator also noted that processing cancellations varied according to the types of permission and individual circumstances, so the formal submission date of the cancellation request provided a clear and consistent date from which to determine the pro-rating.
