FSA keeps up the pressure on senior managers

United Kingdom
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 proposals


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.


Consumer complaints


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 inconvenience.


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 undermined.


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.