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corporate plans and budgets » Plan & Budget 2002/03 - New standard term for funding the voluntary jurisdiction

10.1 The joint FSA/Financial Ombudsman Service Policy Statement on CP74 and CP99 included the ‘final’ text of the funding rules in DISP 5. However, the rules could not be made at that time; they were subject to consultation on the specific figures to be included in the fee-instrument in DISP 5 Annex 1R. This sets the tariff-rates for general levy purposes and the case fees that firms must pay.

The consultation on those figures is being conducted through the FSA’s Consultation Paper CP119 which is being issued simultaneously with this paper. The funding of the Voluntary Jurisdiction will be achieved by applying relevant funding rules in DISP 5 to the firms that join the Voluntary Jurisdiction. However, the Standard Term which will apply those rules can only be made at the same time as the funding rules in DISP 5.

10.2 Appendix E provides the proposed text of the new Standard Term.

commentary on the proposed Standard term

10.3 The rules and guidance identified by each sub-paragraph of the proposed Standard Term, as set out below, are applied to Voluntary Jurisdiction participants (as part of their agreement to be subject to the Voluntary Jurisdiction) as if they were authorised firms - but subject to the minor variation where stated:

  • DISP 4.2.12R(1) This sub-paragraph applies DISP 5.4.6R, so that Voluntary Jurisdiction participants will be obliged to pay the general levy.
  • DISP 4.2.12R(2) This sub-paragraph applies DISP 5.4.8R, so that the calculation of the general levy against Voluntary Jurisdiction participants is made in exactly the same way as for the Compulsory Jurisdiction.
  • DISP 4.2.12R(3) This sub-paragraph applies DISP 5.5.1R, so that a Voluntary Jurisdiction participant must provide the Financial Ombudsman Service with a statement showing the total amount of relevant business that it conducted in the previous year to 31 December, in relation to the tariff-base for each of the industry blocks into which the participant falls.
  • DISP 4.2.12R(4), (5) and (6) These three sub-paragraphs apply DISP 5.6.1R, DISP 5.6.6R, DISP 5.7.5R and DISP 5.7.6R, so that Voluntary Jurisdiction participants will be obliged to pay standard and special case fees, and the supplementary levy for establishment costs of the Financial Ombudsman Service.
  • DISP 4.2.12R(7) This sub-paragraph applies the rules relating to payment of fees in DISP 5.8.1R to DISP 5.8.6R and DISP 5.8.8R and DISP 5.8.9R, so that the general levy and supplementary levy are paid annually or quarterly by direct debit; standard and special case fees for chargeable cases are payable within 30 days of the date of invoice; and interest at 10% per annum will be payable on outstanding invoices. If it appears to the FSA or to the Financial Ombudsman Service that there are exceptional circumstances, any fee payable may be remitted in full or part or refunded.
  • DISP 4.2.12R(8) This sub-paragraph applies DISP 5.9.1R and DISP 5.9.2R, which are rules making provision for apportioning the general levy and the supplementary levy when a Voluntary Jurisdiction participant joins the Voluntary Jurisdiction part way through a financial year.
  • DISP 4.2.12R(9) This sub-paragraph applies the whole of DISP 5 Ann1R, which is the annex to the funding rules specifying the amounts payable.

9.3 Financial services firms are grouped in a total of 15 different industry blocks, based on provisional data provided by the FSA. The levy has been apportioned across these blocks, according to the number of case-handling staff assigned to deal with cases that fall in each relevant block. During the consultation period we intend continually to refine our fee data which may give rise to a change, perhaps materially, in the tariff rates.

9.4 As mentioned in the policy document, Dispute Resolution: the Complaints Sourcebook, we intend to send out estimated invoices in March/April 2002, based on the above tariff, which we will revise in the autumn to take account of the tariff data received from the FSA.

9.5 In addition to the annual budget of £28.2m, we intend to recover one third of our £4.9m establishment costs. Establishment costs will be collected from firms over a three-year period until 2004/05 (£1.63m per annum) and will be charged in proportion to the general levy. These rates are also subject to consultation in CP119 as above.

conclusion

10.4 In relation to the cost of membership of the Voluntary Jurisdiction, Voluntary Jurisdiction participants will pay on the same basis as authorised firms in the Compulsory Jurisdiction.