Section 2 Flashcards
What is the Financial Ombudsman Service’s relationship with the FCA?
Operationally independent of the FCA, board appointed by FCA.
Purpose of FOS
- Free dispute resolution service for eligible complainants
- Private not public
FOS compensation
- Maximum award to complainants: £355,000 (and reasonable costs)
• Financial loss, pain and suffering, damage to reputation and distress and inconvenience - If the complainant accepts the award, it is binding on the firm
- If the complainant rejects the award, they can pursue the matter through the courts
Compulsory Jurisdiction vs. Voluntary Jurisdiction
Authorised firms conducting regulated activities are subject to the compulsory jurisdiction of the FOS.
Firms conducting other investment business, such as buy-to-let mortgage services, can be subject to voluntary jurisdiction.
As is suggested by the terms, firms must accept compulsory, but can choose to accept voluntary jurisdiction.
Understanding the award limit for the FOS
The limit depends upon the date the event complained about actually
happened, as well as when it was brought in front of the FOS:
• £355,000 for complaints on, or after 1 April 2020, about acts or omissions
by firms on, or after 1 April 2019.
• £350,000 for complaints between 1 April 2019 and 31 March 2020 about
acts or omissions by firms on, or after 1 April 2019.
• £160,000 for complaints about acts or omissions by firms before 1 April
2019, and which are referred to the service after that date.
From April 2020, the award limit has been linked to the CPI index, and
rounded down to the nearest £5,000.
Pension Ombudsman Service
As with the FOS for complaints about financial service firms, if a client cannot get a satisfactory response for a complaint to a pension provider, they can take their complaint to the POS.
Who can super-complaints be made by?
Certain, HMT-approved, consumer bodies
- Consumer body can raise competition and consumer issues to FCA
Mass-detriment references can be made by FOS or by firms themselves if there has been:
- Regular failures by a firm (or firms) to comply with regulatory requirements, resulting in loss or potential loss to consumers
- Firm acting in a way in which, if a complaint was to be made to FOS, the FOS is likely to find in favour of the complainant
FCA must respond within [how many days?] to super-complaints or mass detriment references, explaining what the FCA intends to do.
90
What does the Financial Services Compensation Scheme allow for?
Clients can claim for losses when a firm goes into liquidation
FSCS eligible claimants only:
Max claims:
Deposits - £85,000
Investments - £85,000
Home finance - £85,000
FSCS all clients:
Compulsory insurance 100% of claim
General insurance 90% of claim
Max payout for scheme is unlimited
Funding and insurance
Authorised firms are responsible for funding the FCA, the FOS and the FSCS. Any client may claim in respect of long-term insurance (e.g. life) and compulsory insurance (e.g. employers’ liability). Those deemed eligible counterparties can never claim unless they are a small business (e.g. sole trader) and the claim arises from business outside their expertise.
Eligible claimants include most customers of the defaulting firm except:
- Other authorised firms
- Overseas financial institutions
- Supranational or governmental agencies
- Large companies or large mutual associations
Temporary high balances
Large deposits up to £1m (e.g. from a house sale) are covered for up to 12 months, starting from the date the temporary high balance is credited to the individual’s bank account.
