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Clive Briault, Managing Director Retail Markets at the FSA, said: “The new arrangements clarify the different roles and responsibilities of the FSA and the ombudsman service when 'wider implications' issues arise; improve the identification and handling process for such cases at both the FSA and the ombudsman service; enhance co-operation on cases between the two agencies; and improve the overall transparency of the process.
"We consulted on these changes last year in the context of the two year review of the Financial Services and Markets Act. They are a significant step forward, and they received wide support from the industry and other stakeholders."
Walter Merricks, Financial Ombudsman Service chief ombudsman, said: "The wider implications procedures are now in place and working well in practice. The FSA and the ombudsman service have already introduced effective arrangements for improved co-ordination. Feedback has shown that both industry and consumer bodies want as much transparency as possible about the wider implications process and the new proposed rules will clarify and formalise the procedure, including providing for input from relevant stakeholders."
Named individuals
Under the new procedures the FSA and the ombudsman service will have nominated individuals within both organisations who will act as contact points for ‘wider implications’ cases and be responsible for communication, liaison and co-ordination. They will be available to receive recommendations from firms, trade bodies and consumer bodies, and liaise between the FSA and the ombudsman service in order to ensure that the referral process and any feedback is administered efficiently.
Case studies
To provide greater transparency today’s publication describes four recent cases (two where the FSA became involved and two where it decided not to) – to illustrate how the new processes might work in future and likely outcomes.
Appeals mechanism
Last year’s Consultation Paper on ‘wider implications’ (CP 04/12) looked at the legal and practical issues involved in introducing an external appeals system that would operate after an Ombudsman decision. The majority of respondents, including larger firms and consumer bodies, were opposed to a formal appeals mechanism. The ombudsman service procedures already involve at least two stages, affording an appeal by either party from an adjudicator to an ombudsman, and an ombudsman’s decision is subject to judicial review by the courts. Consequently the FSA and the ombudsman service do not propose to recommend to the Government to bring in legislation to introduce an external appeals mechanism.
Background
- Feedback on CP 04/12 FSMA 2 Year Review: Financial Ombudsman Service and Consultation on Consequential Changes to Financial Ombudsman Service Procedural Rules is available on the FSA Website. As well as feeding back on CP04/12: FSMA Review: Financial Ombudsman Service (July 2004) it consults on consequential changes to the ombudsman service's procedural rules for handling wider ‘wider implications’ cases.
- ‘Wider implications’ cases can be those where there is a widespread issue or issues which could give rise to significant consumer detriment. The Ombudsman is in a unique position to see such an issue arising across a number of firms, although it may consider the implications in any one case to be of sufficient importance that the FSA’s attention should be drawn to it. Equally, the implications could indicate a possible materially detrimental effect on the financial resources of firms, or on the market in general.
- Where a potential “wider implications” case is identified, the FSA can consider whether a regulatory solution would be preferable to the ombudsman service deciding individual cases. The FSA may (for example) take supervisory or enforcement action or offer an interpretation of existing rules. More generally, the FSA may consider the need for new rules, or guidance to clarify existing ones. The ombudsman service may suspend or terminate handling relevant complaints, depending on the stages they have reached, whilst the regulatory action is carried out. This might be done, for example, where the FSA is taking action that might result in redress being paid to consumers.
- The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection of consumers; and fighting financial crime.
- The FSA aims to maintain efficient, orderly and clean financial markets and help retail consumers achieve a fair deal and improve our business capability and effectiveness.
