Improving the complaints handling process – a wider scope for referrals to the Financial Services Ombudsman

In line with the FCA’s initiative of improving complaints handling procedures through increased process transparency and providing further assistance to firms, the FCA have updated their Complaints Sourcebook.

Change

The updates to the Complaints Sourcebook encompass a new rule concerning the eligibility of a complainant, until the change, if a complainant was categorised as a professional client their right to approach the Financial Ombudsman Services in an attempt to resolve their dispute was barred. The new rule (DISP 2.7.9A) allows professional clients to be eligible as complainants as long as they fall with the ‘Consumer’ definition. The FCA Handbook defines a consumer as someone who ‘is a natural person acting for purposes outside of their trade, business or profession’ hence, in specific circumstances, professional clients would no longer be affected by the indirect bar to raise complaints.

Impact on investment firms

Investment firms would be affected by this change as another eligibility requirement to bring a complaint relies on the relevant relationships which are listed in DISP. This captures the relationship between Investment Managers and their Investors under 2.7.6(3) and (3A). Furthermore, investment firms will also be affected by this change because Investment Management Agreements (“IMA”) contain Complaints clauses. It is required by FCA rules (stated in section 1.2.1 of the DISP) to have a Manager’s Complaints Handling procedure/policy in place which has to be referred to the respective Complaints clause and be made readily available to clients. Consequently, investment firms will need to update their IMA so that their Complaints clauses reflect this change.

Cleveland & Co, your external in-house counsel, specialises in IMA drafting, review and negotiation. We are here to help with the implementation of any new rules or regulation, including the above-mentioned update to Complaints clauses.