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Financial Services and Markets Appendices to the Minutes of Evidence


Note by the Financial Services Authority on the jurisdiction of the Financial Services Ombudsman Scheme

  1. The draft Bill provides that the Financial Services Ombudsman (FSO) Scheme will have a compulsory jurisdiction and a voluntary jurisdiction. These will be defined by a combination of rules (and directions) made by the FSA and the FSO Scheme and will be the subject of detailed public consultation later this year.

  2. The scope of the new Scheme will be defined by reference to the following factors:

    —  Activity—whether the complaint relates to an activity covered by either the compulsory or voluntary jurisdiction of the scheme;

    —  Complainant—whether the complainant is an "eligible complainant";

    —  Complaint—whether the complaint itself is an "eligible complaint" (e.g., whether it relates to an act or omission giving rise to financial loss/distress or inconvenience; whether it was lodged within the prescribed time limits; whether the firm has attempted to resolve the complaint first etc.).


  3. As it currently stands, the draft Bill provides for the Scheme to have compulsory jurisdiction over all regulated activities and over any non-regulated activities (e.g., mortgage lending) listed in Schedule 2 and designated by the FSA for this purpose. However, the Treasury has recently announced that it intends to make the provisions for setting the Scheme's jurisdiction simpler and more flexible.

  4. The FSA will have wider discretion over which complaints are to be included in the compulsory jurisdiction. It will now be able:

    —  to include within the compulsory jurisdiction all financial services activities carried out by authorised persons, not just those specified in the Bill;

    —  to include within the compulsory jurisdiction complaints which relate to a service which forms part of an activity within the compulsory jurisdiction, even though that service, if looked at in isolation, would not be a financial service (e.g., a complaint about a property valuation, where it was carried out in the course of arranging a mortgage); and

    —  to exclude from the compulsory jurisdiction certain categories of authorised firms where there is a case to do so (e.g., wholesale business where firms do not have customers who would be eligible to use the Scheme).

  5. This means that the vast majority of disputes which are currently handled by the existing schemes (set out in the attached annex) will be capable of being brought within the new Scheme's compulsory jurisdiction. The Treasury plans to give the FSO Scheme similar discretion over the scope of the voluntary jurisdiction (see paragraph 7 below).

  6. Activities will be brought within the compulsory jurisdiction by virtue of a Compulsory Jurisdiction Direction (CJD) made by the FSA. However, this will be subject to cost benefit analysis and consultation. The FSA will therefore be examining the case for including different categories of business within the scope of the compulsory jurisdiction of the new Scheme and will consult on this, and other issues referred to in this note, later in the year.


  7. The voluntary jurisdiction will apply to any firm which has agreed to participate in the Scheme, as extended by a Voluntary Jurisdiction Direction (VJD). VJDs may bring within the scope of the Scheme:

    —  complaints against unauthorised persons who are carrying on activities which are subject to the compulsory jurisdiction for authorised firms; and

    —  complaints against authorised or unauthorised persons arising out of activities which are not part of the compulsory jurisdiction.

  VJDs will be made by the FSO Scheme following consultation, and with the approval of the FSA.


  8. The draft Bill envisages that the FSA will define which complainants are eligible to complain in relation to activities covered by the compulsory jurisdiction and that the FSO Scheme (with the approval of the FSA) will define complainant eligibility in relation to the voluntary jurisdiction.

  9. The FSA has taken the view that the new Scheme should be designed primarily to assist those who are least able to sustain financial loss and who do not have the resources to pursue their claims before the courts. We therefore proposed, in our earlier consultation paper on this area (Consultation Paper 4 on "Consumer Complaints"), that access to the new Ombudsman arrangements should be restricted to complaints from private individuals, unincorporated bodies, partnerships and small companies. This won general approval and the forthcoming consultation paper will seek to define these terms more precisely.


  10. We envisage, subject to further consultation, that the new Scheme will deal with unresolved consumer disputes about business or services provided in or from the UK, irrespective of the country of residence of the consumer.

26 March 1999

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