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Smaller law firms are expected to suffer a large hike in registation fees under plans revealed by Britain’s Financial Services Authority(FSA). The FSA issued proposals to charge fees based on a firm’s risk assessment, which includes type and size. These will come into force next year when the FSA takes over as the single statutory financial regulator. Many law firms doing investment work are comparatively small and lack lawyers carrying out such work on a full-time basis. They are therefore considered a higher risk in terms of potential compensation claims against the FSA. Under the new system, they will be charged more than their existing fees which do not take risk into account. Some critics say the smaller firms have so far been subsidized by the larger, lower-risk firms who pay higher fees. Lawyers also anticipate an increase in bureaucracy as the Law Society’s compliance rules have been relatively relaxed to date. One prominent financial services lawyer considers the proposals, which are now out for consultation, to be misjudged. “I feel it is entirely inappropriate to increase fees when we are already subject to heavy regulation elsewhere,” he says. Paul Boyle, FSA chief administrative officer, argues the FSA is committed to being cost effective and the new charging system is fair. “The establishment of a single statutory regulator will inevitably lead to changes to the basis upon which fees are calculated yet our proposals are not intended to bring about radical change,” he says. Under the new proposals fee-payers will be grouped together into blocks of organizations offering broadly similar products and services. It is hoped that by setting fees in this way the FSA will minimize cross-subsidy between different categories of business. In total, the FSA, is proposing 22 different fee-blocks. The FSA takes over as the single statutory financial services regulator in 2001, although the treasury has not yet finalized the date, after the Financial Services and Markets Act, received Royal Assent on June 14.

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