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FCA: FOS does not need more rules about interpreting regulation

FCA logo glass 620x430The FCA has said that the Financial Ombudsman Service does not need more guidance on how it should match the regulator’s rules with the complaints adjudicator’s judgments.

While the FCA regulates firms according to its handbook, FOS decides on complaints based on a ‘fair and reasonable’ test, that is, whether the claim would be successful in court.

While the FOS guidelines currently say adjudicators should bear the FCA’s positions in mind, there is no further details on the weight it should give them or which ones should be prioritised.

The FCA says is a paper today: “The Financial Services and Markets Act 2000 requires the FOS to determine complaints on the basis of what is fair and reasonable in all the circumstances of the case. In doing so, it will take into account, amongst other things, relevant law and regulations, regulators’ rules, guidance and standards. We do not believe that a new rule needs to be introduced to clarify which of our rules the ombudsman should take into account when deciding what is fair and reasonable in a complaint about the provision of guidance.”

The statement comes in response to feedback from firms on an incoming change to the definition of advice to clarify that it must be a personalised recommendation, with other services more clearly defined as guidance.

Respondents to the FCA’s consultation on the proposals suggested a further rule for the FOS, that it if guidance had been given and not advice, it would only take into account the FCA’s looser rules on guidance.

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Comments

There are 7 comments at the moment, we would love to hear your opinion too.

  1. Am I not correct in thinking that a claim in court for negligence regarding an event that took place more than 15 years ago would fail if the respondent invoked section 14B of the Limitation Act 1980?

    If so, then the FCA’s assertion would seem to be untrue.

  2. They never take in to account the common law defence of a 15 year longstop though do they?
    After 2 years of discussions with the FCA on solutions to the Longstop issue as part of the APFA Longstop working party,we were just fobbed off again and I wasted my time and effort (and train fares) visiting them at Canary Wharf.

  3. Were whoever at the FCA has expressed this view to be on the receiving end of a few FOS verdicts which are patently out of sync with what the regulations say, s/he might well adopt a different position.

  4. Put simply, without the assurance requested, a regulated firm that gives guidance could find itself dealing with a complaint and be judged on the same basis as if it gave advice.

    Practically speaking this shouldn’t make any difference as that’s the current situation – it’s difficult to argue whether you gave advice or guidance so the FOS will default to advice. However, the change in what constitutes advice does separate out guidance more clearly so it would help to know how this is going to be treated.

    On the other hand, it suits the FCA and the FOS to do nothing as it can only reduce current powers.

    If you are going to provide guidance, do it through an unregulated entity then it’s outside the FOS’s reach.

    On a separate note the article contradicts itself. The second paragraph reads:

    “While the FCA regulates firms according to its handbook, FOS decides on complaints based on a civil liabilities test, that is, whether the claim would be successful in court.”

    This would be the answer to adviser’s prayers and solve the whole FOS issue at a stroke. Sadly it is incorrect. The true position is quoted further down, i.e. “FOS determine complaints on the basis of what is fair and reasonable in all the circumstances of the case. In doing so, it will take into account, amongst other things, relevant law and regulations, regulators’ rules, guidance and standards.”

    For the uninitiated ‘fair and reasonable’ means anything that doesn’t fall into the category of ‘it is so unreasonable that no reasonable person acting reasonably could have made it’. For those non-legal brains that means in practice the FOS can still make unreasonable decisions, just not ones that NO reasonable person would make! The line is drawn a long way into the ‘grey area’.

  5. Merricks said “We unashamedly make new law”, that means the FOS doesn’t need to interpret anything.

  6. I am sure the FCA is right! However the question that needs to be asked is how can we be sure the FOS adheres to the rules within current guidance? Particularly given the impact on firms where the FOS get it wrong with no simple recourse? Treating customers fairly is the cornerstone of regulation so why are advisers not afforded the same standard of fairness? This is arguably the biggest threat to regulated firms than anything else.

  7. How is it that 2 identical cases of e.g. endowment claims had two opposing results? This comes straight from an X FOS adjudicator!

    This FOS needs a full audit and screening for fraudulent claims.

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