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When the regulator gets it wrong

The Complaints Commissioner deals with complaints about the the FSA and the regulator has modified several of its processes based on its findings, says Bill Warren

Over the past couple of weeks I have outlined the work of three organisations intended to keep an eye on the Financial Services Authority and make sure the views of some of its stakeholders are listened to. These are the Financial Services Practitioner Panel, the Smaller Business Practitioner Panel and the Financial Services Consumer Panel. To round off this series on who’s keeping the regulator in check this week it’s the turn of the Complaints Commissioner which, along with the three practitioner panels, has recently published its annual report for 2005/06.

The report explains that the Complaints Commissioner was set up to meet the requirements of the Financial Services and Markets Act 2000. This specified that over and above the FSA’s requirement to operate a complaints scheme to investigate complaints against itself there must also be a commissioner that is independent of the FSA and able to conduct impartial investigations.

Complaints may be made to the commissioner by a member of the public or authorised firm but they must first have submitted the complaint to the FSA. The commissioner will only consider a case if it concerns allegations of misconduct by the FSA arising from the way it has carried out or failed to carry out its functions. These include complaints alleging mistakes and lack of care, unreasonable delay, unprofessional behaviour, bias and lack of integrity.

During 2005/06 the commissioner received 126 allegations and complaints, more than half of which were from consumers, and it also had to handle 33 cases brought forward from the previous year. A couple of topics dominated complaints received from firms – electronic submission of Retail Mediation Activities Return forms and the refund of fees in the FSA’s authorisation process. A sizeable proportion of complaints dealt with – 91 out of 146 – were found to be either beyond the scope of the commissioner or were passed to the FSA for stage one investigation.

No individual or firm is named in the report but it does publish some interesting case summaries to illustrate the sort of complaints that it can and can’t handle. For example, it handled a case concerning poor record-keeping and long delays by the FSA and one that hinged on the Financial Ombudsman Service giving erroneous information to the FSA. Cases it referred to other bodies included a consumer complaint about an authorised firm which was concluded by the consumer being referred back to complain to the firm directly and, if still not satisfied, to the FOS.

Another complaint about an ex-pat consumer’s difficulty in establishing their identity because of the provisions of the money laundering regulations was concluded by referring the complainant to the Joint Money Laundering Steering Group. None of the case studies involved complaints about mortgage or general insurance advice and sales.

The Complaints Commissioner is keen to point out that the scheme is not a full compensatory scheme and that referring a complaint to the commissioner is not the appropriate avenue for financial recompense. On the other hand, the commissioner believes that its work adds value by feeding back areas of potential weakness to the FSA. In light of such management information, the FSA has made improvements to its complaints scheme and undertaken initiatives with respect to early complaint identification, reducing the time spent per case and improving communication with complainants.

This brings us back to the fact that the commissioner is there to handle complaints only after they have been through the FSA’s stage one process and are unresolved. The FSA’s complaints process is set out in its Handbook which explains which complaints it can and cannot investigate, the time limits and the process by which a complaint can be made, how it will be processed and what the outcomes could be. If you prefer to read the information in booklet form, follow this link to the FSA’s website to download its complaints leaflet www.fsa.gov.uk/pages/about/complaints/pdf/complaint_leaflet.pdf

• I would like to correct a statement in one of my recent columns that the Financial Services Small Business Practitioner Panel has no mortgage or general insurance brokers on it. Please note that in addition to the mortgage network mentioned in the column there is one other directly authorised mortgage and insurance broker and two more general insurance-only authorised brokers on the panel.

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