Howard Davis, chairman of the Financial Services Authority, has
indicated that the FSA will toughen its stance on the
responsibility of senior management. In backing the previous
efforts of the SIB and SFA to progress this topic, he made it clear
that the industry could expect both stricter guidelines for senior
management, and an increase in the number of managers and directors
who would be made to register individually. For example, the FSA is
likely to adopt an individual registration scheme similar to those
operated by the current regulators.
In addition, the FSA has also announced that it plans to set up an
"early warning unit" to operate across the entire financial
services regulatory spectrum. It would be the job of this unit to
monitor and investigate areas of financial activity which might
lead to industry-wide problems (such as pension mis-sales) as
opposed to compliance problems at particular firms.
FSA publishes consultative papers on Consumer Complaints and
Consumer Compensation - Catherine Lomas considers the
The SFA has now published a second tranche of consultative
documents which give practitioners the chance to shape the new
structure of financial services regulation.
Ministers have decided that the current Ombudsman schemes have
significant differences in terms of eligibility criteria, limits on
awards, time limits and terms of reference. They present a
"patchwork quilt" and consumers find this confusing. Ministers have
therefore decided that they would like to see a single Ombudsman.
However, the FSA remains open to persuasion that the Ombudsmen
should be organised on a departmental basis, so that there is a
single entry point for complaints but that the existing expertise
of the various Ombudsmen is maintained and the close personal
involvement in the cases which they deal with is not lost. The
departments would be overseen by a Super-Ombudsman.
Ministers have decided that membership of the Ombudsman scheme will
be compulsory for firms authorised by the FSA.
It is also intended that the Ombudsman procedure is only available
to private individuals, unincorporated bodies, partnerships and
small companies. The limits on amounts available would be £100,000,
with an additional £1,000 maximum for distress and
One major change which is proposed is that, due to the influence of
the European Convention on Human Rights, parties have the right to
have Ombudsman proceedings conducted in public, to be legally
represented, to call witnesses who would be open to cross
examination, and to have the eventual decision published. There is
very little discussion of the implications of this change within
the consultative document. Views are simply invited on whether it
is preferable to aim to meet the requirements of the European
Convention within the Ombudsman process, or by allowing a full
right of appeal to an independent statutory tribunal. In either
case, it would appear that the simplicity and cost effectiveness of
the Ombudsman process, which are essential to its success, might be
It is proposed that industry wide codes, such as the Banking Code
of Conduct, should be taken into account by the Ombudsman where he
considers that they are relevant.
It is intended that the cost of the new Ombudsman scheme be divided
between all regulated firms as part of their annual authorisation
fee, and a case-handling charge for each case which is brought
against a firm.