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:
complaint relates to an activity covered by either the compulsory
or voluntary jurisdiction of the scheme;
the complainant is an "eligible complainant";
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
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