HM Treasury (HMT) has published a consultation paper setting out proposed reforms to the UK Financial Ombudsman Service (FOS), in tandem with the joint UK Financial Conduct Authority and FOS consultation paper (CP25/22) on modernising the financial redress system (with accompanying press release). The consultations were also announced by the Chancellor of the Exchequer in her speech delivered at Mansion House on 15 July, where she referred to the delivery of the most significant reform to the FOS since its inception.
The HMT consultation sets out findings of the review of the FOS which was carried out as part of the UK government's Regulation Action Plan, and confirms the UK government's intention to deliver reforms in relation to: (i) the 'fair and reasonable' test to be applied by the FOS in accordance with the FCA's intention for relevant rules; (ii) formalisation of how the FOS and FCA work together to provide regulatory certainty; (iii) clarity on the FOS and FCA roles in the context of wider-implications issues and mass redress events; (iv) flexibility for the FCA in investigation of and response to mass redress events; and (v) an absolute time limit of ten years for bringing complaints to the FOS (with limited flexibility afforded to the FCA where a longer time is justified in exceptional circumstances).
The joint FCA and FOS consultation confirms support for the HMT proposals, and states that certain proposals will be the subject of future consultations, such as the mechanism by which parties may be able to request a referral to the FCA following an ombudsman's initial assessment. In relation to wider-implications issues and mass redress events, the consultation includes guidance on good and poor practice for firms' identification and rectifying of harm to address feedback from firms requesting clarity. Proposed changes to the FCA handbook include new wording in SUP 15.3 on when firms should report potentially systemic or recurring issues, to assist the FCA in identifying and managing mass redress events, and a new requirement in DISP 1.6 requiring respondents to provide information to the complainant about how long the respondent has to provide a final response letter. Other proposed changes cover operational efficiency amendments in respect of the COMP handbook.
The deadline for comments on both consultations is 8 October.
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