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Chris Hannant: FOS needs independent appeals process

An important principle of a judicial or quasi-judicial system is that not only must justice be done but it must be seen to be done. The parties involved must have confidence in the system making the decision and that their argument will be fairly heard.

I am not sure this is the case with the Financial Ombudsman Service. Whether well founded or not, a perception has arisen that needs to be addressed.

It is important we have a dispute resolution service: it keeps disputes out of costly courts and gives consumers confidence in financial services. But it is also important financial firms have confidence in the system.

In discussions about the Financial Advice Market Review, it is often asked why services have not developed to take advantage of “simplified” or “focused” advice? It is clear one of the primary obstacles is the fear, in the event of a complaint, that the service would be treated as full advice by the FOS.

This could be addressed by providing a properly independent appeals process at the FOS. At present, a decision is made by an adjudicator, with a right to appeal the decision to an ombudsman. There is a problem in the close working of ombudsmen and adjudicators that is hard to mitigate in terms of not allowing it to colour judgments.

The FOS says “trust us, we do all we can to prevent and manage potential conflicts of interest” but even if the two presiding individuals never meet, it is hard to get over the instinctive loyalty to being part of the same team, the same organisation.

Separation provides more effective scrutiny of decisions and separation of appeals processes is the more conventional approach. The FCA itself separates appeals in its enforcement procedures with the Regulatory Decisions Committee and Upper Tribunal. Justice not only has to be done; it has to be seen to be done.

Chris Hannant is director general at Apfa


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There are 2 comments at the moment, we would love to hear your opinion too.

  1. Spot on – like clients, adviser should have the right to appeal the decision to court. This oversight would improve perception, fairness and the FOS decision making process. There is an inevitable bias at the moment in that if the client is ruled against the case could end up in court whereas if the IFA is ruled against it won’t. What would you do in their shoes if you were unsure?

    And the FCA is talking about increasing the limit above £150K – for decisions made by unqualified adjudicators with no appeal.

  2. I agree with the sentiment of what Mr Hannant says, though I would take issue with his statement “This could be addressed by providing a properly independent appeals process at the FOS.” At the FOS? What ~ part of the FOS? No. Rather, I suggest that it can only be addressed by an appeals body entirely independent of the FOS so that it can rule with scrupulous impartiality. Once again, this brings us back to the need for a Statutory Independent Regulatory Oversight Committee with unassailable powers to issue (and enforce) rulings without fear or favour or regard for political considerations.

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