Welcome to the UKGI weekly regulation update service for Aviva ABC brokers

Context

HMT has announced a significant new Consultation reviewing the Financial Ombudsman Service.  It sets out the findings and proposed reforms following the Economic Secretary’s Review of FOS, which was announced in March in the government’s Regulation Action Plan.  The Consultation proposes a package of reforms to the legislative framework in which the FOS operates, which are designed to “…stop FOS acting as a quasi-regulator and ensure that FOS is delivering its role as a simple, impartial dispute resolution service”.  Again, this is clearly an effort to ‘rein in’ FOS in issuing decisions in individual cases (which is what it is there to do) where such decisions will, by virtue of FCA requirements to take FOS decisions into account when deciding on courses of action, impact wider sections of the financial services sector.

Key points to note and next actions

• The announcement sets out that these reforms are intended to provide greater certainty and predictability for consumers and firms who use the FOS.
• The Consultation sets out the current statutory framework in which FOS operates but sets out concerns highlighted in an earlier review conducted by the Economic Secretary to the Treasury, including concerns about:
  • the framework in which the FOS operates which has resulted in it acting, at times, as a quasi-regulator;
  • whether the FOS is applying today’s standards to actions that have taken place in the past; and
  • the practices that have grown up over time on compensation.
• In summary, the Government will use changes to legislation, when Parliamentary time allows, to deliver the following reforms:
  • An adapted ‘Fair and Reasonable’ test – the FOS will be required to find that a firm’s conduct is fair and reasonable where it has complied with relevant FCA rules, in accordance with the FCA’s intent for those rules.
  • A framework which formalises the roles of the FOS and the FCA in providing regulatory certainty – where there is ambiguity in how the FCA’s rules apply, the FOS will be required to seek a view from the FCA and the FCA will be obliged to respond. Where appropriate, a party to a complaint will be able to request that the FOS seeks the FCA’s view on interpretation of rules.
  • A framework which provides clarity on the roles of the FCA and the FOS in relation to wider implications issues and mass redress events – the FOS will be obliged to refer potential wider implications issues or mass redress events to the FCA and the FCA will be obliged to consider those issues. Parties to a complaint will also be able to request the FOS refer such an issue to the FCA. It will be for the FCA to decide how those issues should be addressed.
  • A more flexible mass redress event framework – the FCA will be able to investigate and respond to mass redress events more easily, ensuring that, when needed, mass redress events can be considered and dealt with quickly and effectively, providing consistent outcomes for consumers and avoiding disruption to markets.
  • An absolute time limit for bringing complaints to the FOS – consistent with the aim of providing a simple, impartial dispute resolution service which deals quickly and effectively with complaints, an absolute time limit in legislation will require complaints to be brought within 10 years of the conduct complained of. This will avoid the risk of the FOS having to deal with a high number of historic cases, which can be challenging to resolve quickly and effectively.