In a consultation paper on its fees and levies policy for 2011/12, it says there is disagreement between sectors this would be the fairest mechanism.
The suggestion was one of two made by AIFA last year following the FSA’s strategic review of its cost allocation and fee model.
As well as calculating intermediaries’ fees based on their revenues, AIFA suggested the FSA’s ‘indirect’ costs – those for industry-wide investigations and other projects – should be based on the overall proportion of revenues intermediaries receive in relation to the whole financial services industry.
“We do not believe there is any agreement between the sectors affected that, in principle, fees for intermediaries should be based on the proportion of revenue that they receive relative to product providers,” the paper reads.
“We acknowledge this may be because the effect of such a change on the fees paid by affected firms is not currently known.”
However, the FSA says the main consensus across all sectors of the industry is to base firms’ fees on either the actual costs of regulating them individually, or on their individual risk profiles.
Although it does not propose to adopt this system, it says it would be “happy” to consider further research in this area.
Following the strategic review of its cost allocation methods last year, the FSA introduced a £1,000 minimum fee for all firms and a ‘straight line’ recovery of the costs to ensure the level of fees paid by firms is linked to the size of permitted business they undertake.
But AIFA said the FSA’s methods for allocating direct, indirect and overhead costs to the different ‘A’ fee blocks were unfair.
The FSA accepts it could be clearer in its explanation of direct, indirect and overhead costs and will clarify these terms in a consultation paper in February.
Currently, the FSA allocates its annual costs – £454m for 2010/11 – in two stages: firstly to each of its 19 fee blocks, then to individual firms within those groups.
The FSA applies what it calls ‘direct’ costs during the first stage – those costs for the year which can be easily attributed to certain fee blocks.
However, the second stage concerns ‘indirect’ costs which, according to AIFA, can not be easily passed on to specific fee blocks.
