IOC - UK Reg CH 5 - Complaints and Redress Flashcards
- How must a firm publicise its complaints handling procedures?
Firms must:
publish appropriate summary details of their internal process for resolving complaints and of the right of eligible complainants to take unresolved complaints to the FOS
refer eligible complainants in writing to the availability of these summary details at, or immediately after, the point of sale, and
provide such summary details in writing on request and when acknowledging a complaint.
- What procedures should be included within a firm’s complaints-handling arrangements?
Firms must put in place appropriate management controls and take reasonable steps to ensure that when handling complaints they identify and remedy any recurring of systemic problems, for example, by establishing formal processes for:
identifying the root causes of complaints and common root causes of complaints about particular products or services
analysing how many complaints are resolved within one business day of receipt
considering whether root causes may also affect other processes or products, including those not directly complained of
correcting, where reasonable to do so, such root causes and prioritising how they are dealt with
providing regular reports to senior personnel on recurring or systemic problems
keeping records of analysis and of senior personnel response to management information on root causes of complaints.
- List the types of eligible complainant.
Eligible complainants are:
consumers – any person using or contemplating using the services of an authorised firm or an appointed representative
micro-enterprises – any person engaged in economic activity, irrespective of legal form, employing fewer than ten persons and having a turnover or balance sheet not exceeding e2 million at the time the complaint is raised
charities with an annual income of less than £1 million at the time the complaint is raised
a trustee of a trust with a net asset value of less than £1 million at the time the complaint is raised.
ECPs and professional clients (other than a trustee of a pension scheme) are generally not eligible complainants but they may be so if the complaint was about an activity other than that for which they are classified.
- What are the record-keeping requirements in relation to complaints-handling?
The records must be retained for a minimum of five years from the date the complaint was received if the complaint relates to MiFID business and three years for all other complaints.
- What is the role of the FOS?
The FOS is designed to resolve complaints about financial services firms quickly and with minimum formality. Importantly, it is free to complainants, which removes the deterrent effect of anxiety over legal costs. The FOS does not replace the court system, however, and any complainant is entitled to take civil action against a firm regardless of whether or not the complaint has been considered by the FOS.
- What is the difference between compulsory jurisdiction and voluntary jurisdiction?
Its compulsory jurisdiction (CJ) extends to complaints from eligible complainants against FCA-authorised firms in relation to their regulated activities (and any ancillary activities) which the firm is unable to resolve to the satisfaction of the complainant within the specified timescales. Authorised firms are automatically subject to the compulsory jurisdiction.
Its voluntary jurisdiction (VJ) covers complaints which are not within the CJ. Businesses can opt into the VJ by entering into a contractual arrangement with the FOS. In doing so, they become VJ participants. The FCA has stated that certain complaints which do not fall within the compulsory jurisdiction can be considered under the VJ.
- In addition to costs, what is the maximum monetary award the Financial Ombudsman can compel a firm to pay to a complainant?
The FOS can require the firm to pay over money as a result of a complaint. This monetary award against the firm will be an amount which the FOS considers to be fair compensation; however, the sum cannot exceed £150,000 based on compensation which the FOS considers fair, up to the maximum limit of £150,000. This excludes any interest and costs (£100,000 for complaints received before 1 January 2012).
- What is the role of the FSCS?
The FSCS was established to pay compensation to eligible claimants in the event of a default by an authorised person, which is typically the firm’s insurance cover becoming exhausted and the firm suffering insolvency. It is essentially an insurance policy that is paid for by all authorised firms and provides protection to valid claims for compensation in the event of a firm collapsing.
- Who are normally excluded from claiming compensation from the FSCS?
Eligible claimants are certain persons who have a protected claim against an authorised person who is in default. They include most clients of the defaulting firm, except:
other authorised firms – but see the note below
overseas financial institutions
CISs, their trustees and operators
some pension and retirement funds
supranational institutions, governments and central administrative authorities
provincial, regional, local and municipal authorities
directors and managers of the firm in default and their relatives (unless the firm is a small mutual
association and the directors/managers are not salaried, or unless the firm is a credit union)
companies in the same group as the firm in default unless that company is also a trustee of certain pension schemes
persons holding 5% or more of the defaulting firm’s capital, or of any firm in the same group auditors of the firm in default
any person who has contributed to the firms default
large companies or large mutual associations
large partnerships
persons whose claim arises from transactions in connection with which they have been convicted of money laundering
person’s whose claim arises under the Third Parties (Rights against Insurers) Act 1930.
- What compensation is available under the FSCS for protected deposits?
Deposits: £75,000 per depositor – depositors with some types of temporary high balances will have FSCS protection up to £1 million for up to six months. This includes deposits in a bank, building society or credit union.
- What is the compensation limit for protected investment business?
The compensation limit for protected investment business is £50,000 per person per firm (for claims against firms declared in default from 1 January 2010). 100% of the first £50,000.
- What are super-complaints and mass-detriment references and how quickly must the FCA respond to them?
Under the Financial Services Act 2012, certain consumer bodies are allowed to make what are referred to as super-complaints. A super-complaint allows the consumer body to raise competition and consumer issues with the FCA where a feature of the UK financial services market is, or appears to be, significantly damaging to the interests of consumers. The consumer bodies allowed to raise these issues must be designated as such by the Treasury.
Furthermore, the FOS and firms themselves are allowed to make mass-detriment references. A mass-detriment reference can be made by either the FOS or by a regulated firm if either:
it appears that there may have been regular failures by a firm (or firms) to comply with regulatory requirements, and consumers have suffered, or may suffer, loss or damage as a result, which could be remedied or relieved by legal proceedings or
it appears that a firm (or firms) has regularly acted in a way that, if a complaint were to be made to the FOS, it is likely that the complaint would be determined in favour of the complainant and an award made.
The FCA is required to publish a response within 90 days of receiving a super-complaint or mass-detriment reference, in which the FCA must explain what it intends to do.
