Find out how our Financial Penalty Scheme works and how we use retained penalties for the benefit of firms.
1. Paragraph 21 of Schedule 1ZA of the Financial Services and Markets Act 2000 (FSMA) (as amended by the 2012 Act and the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (Referral Fees) Regulations 2013) sets out how we should treat the financial penalties we impose on regulated persons (firms).
2. The key requirements are:
- The financial penalties we receive must be paid to the Treasury net of certain enforcement costs incurred in the financial year in which the penalties were received. These enforcement costs, which are defined in the legislation and subject to a power of direction by the Treasury, represent the ‘retained penalties’.
- For retained penalties, we must prepare and operate a scheme for ensuring that retained penalties are applied for the benefit of firms.
- Firms that have become liable to pay any penalty to us in any financial year do not receive any benefit from any penalty imposed on any firm under the scheme in the following year.
3. Under our FPS we apply retained penalties, received in any financial year, as a rebate to the periodic fees paid in the following financial year by firms in the fee-blocks set out in Table A.
4. The total retained penalties from any financial year will be applied across these fee-blocks in proportion to the allocation of the enforcement budgeted costs for the following financial year. This will target the benefit from retained penalties to the fee-blocks that are paying for enforcement costs. The allocation of enforcement costs to fee-blocks will be as it was in previous years other than where there has been a material and explainable exception (allocation by exception). Where such an allocation by exception has occurred the retained penalties in the following year will be applied to the revised baseline fee-blocks.
5. If financial penalties do not cover enforcement costs in any year the application of retained penalties to the baseline fee-blocks will not cover the enforcement costs allocated to them.
6. Enforcement costs are not allocated to the A.0 minimum fee fee-block. Therefore, retained penalties are not allocated to this fee-block.
7. The firms on which any penalty was imposed in a financial year will not receive any rebate to their periodic fees paid, for any retained penalties, in the following financial year.
8. Each year we publish a schedule setting out the:
- total retained penalties in the previous financial year
- amount of retained penalties allocated to each fee-block, and
- percentage rebate that will be applied in the following financial year to the periodic fees paid by the firms in those fee-blocks
9. A draft of this schedule is published in our annual fee rates CP in April; the final schedule is published in the subsequent policy and feedback statement to that consultation in July.
Table A: Financial Penalty Scheme – relevant fee-blocks
| Fee – Block |
|---|
| AP.0 FCA Prudential |
| A.1 Deposit acceptors |
| A.2 Home finance providers and administrators |
| A.3 Insurers – general |
| A.4 Insurers – life |
| A.5 Managing agents at Lloyd’s |
| A.6 The Society of Lloyd’s |
| A.7 Portfolio managers |
| A.9 Managers and depositaries of investment funds, and operators of collective investment schemes or pension schemes |
| A.10 Firms dealing as principal |
| A.13 Advisor, arrangers, dealers or brokers (not holding or controlling client money or assets, or both) |
| A.14 Corporate finance advisers |
| A.18 Home finance providers, advisers and arrangers |
| A.19 General insurance mediation |
| A.21 Firms holding client money or assets or both |
| A.22 Principal firms – appointed representatives |
| A.23 Funeral plan providers |
| A.24 Access to cash – designated firms |
| B Recognised investment exchanges, operators of multilateral trading facilities and recognised auction platforms (only) |
| CC.1 Consumer credit – limited permission |
| CC.2 Consumer credit – full permission |
| E Issuers and sponsors of securities |
| G.1 persons registered under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 |
| G.2, G.3, G.4, G.5 firms under the Payment Services Regulations 2017 |
| G.10, G.11 firms under the Electronic Money Regulations 2011 |
| G.20, G.21 firms under the Mortgage Credit Directive Order 2015 |
| G.25 firms under the Data Reporting Regulations 2017 |