Anger as City watchdog imposes 30% rise in fees for big brokers

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Britain's largest traders, stockbrokers and financial advisers reacted angrily to the revelation that they are to be hit with hefty increases in the fees they pay to the Financial Services Authority, after the regulator unveiled a rise of more than 10 per cent in its budget for 2007/08.

Large trading firms will see their fees rise by almost 30 per cent, due mainly to an increase in the regulator's expenditure on financial education.

The FSA said it believed most financial services firms would benefit from its initiatives to increase financial capability, so would therefore have to share the burden of the extra £7.5m that it plans to spend in this area over the coming year.

Firms of larger corporate financial advisers will see their fees rise by more than 16 per cent, while other financial advisers will see theirs increase by just over 10 per cent. Stockbrokers will see average rises of between 10 and 14 per cent.

David Bennett, the chief executive of Apcims, the stockbroking industry's trade body, said the increases were a heavy blow in a year in which the industry had already been hit by a series of additional cost increases. "In a year that firms are bearing the heavy cost of implementing MiFID and capital adequacy, a 10 per cent increase, more than triple the rate of inflation and in excess of a three-fold increase on the previous year's rise, is insensitive," he said. "The reality is the levy on many of our firms will be in the region of 13 to 14 per cent, notwithstanding the other pending levies from the Financial Ombudsman Service and Financial Services Compensation Scheme."

Smaller firms will continue to be protected from the worst of the fee increases, with more than 55 per cent of FSA-regulated firms seeing no more than a 3 per cent rise.

Overall, the FSA revealed it plans to increase its expenditure by 10.1 per cent to £301.7m in the 2007/08 financial year, and will subsequently need to raise the amount it collects from firms by 9.5 per cent.

As well as an increased expenditure on a series of financial education initiatives, the regulator said it would also be investing an additional £11.3m in upgrading its IT infrastructure. The FSA board has also approved plans to spend up to an additional £50m to support the move towards principles-based regulation during the next three years.

Publishing the FSA's business plan yesterday, its outgoing chief executive John Tiner refuted the suggestion that there was a continued resistance over the move to principles-based regulation, claiming most companies had been supportive. "There is unanimous support for us to continue down this path," he said. "It's true to say that firms' compliance departments are less convinced, but [management] see this as an opportunity to have a much more understandable regulatory system."