New complaints handling process – Impact on firms

The FCA has continuously pursued the initiative of increasing transparency in the financial services industry and ensuring the best possible investor outcomes. As part of this initiative, the regulator is seeking to improve complaints handling procedures, by increasing process transparency and encouraging firms to deal more effectively with complaints handling. In the PS15/19 Policy Statement (the “Paper”), published in July 2015, the regulator introduced a number of improvements to the current complaints handling regime that were based on feedback by firms, studies on the industry and previous consultations. In the new complaints rules the FCA are aiming to increase the scope for investors/clients to effectively submit complaints, and to ensure that firms properly address complaints. Two key changes have been introduced in this regard.

1. Scope of complaint eligibility

There will now be wider scope for investor complaints that can be submitted to the Financial Ombudsman Service (“FOS”). The change which the FCA have introduced in DISP 2.7.9A allows professional clients to submit complaints to the FOS provided that they fall within the FCA’s definition of a ‘Consumer’.

Previous DISP Rules: professional clients and eligible counterparties were not considered eligible complainants under DISP 2.7.9.

New DISP rules: complainants, even in the case of professional clients, who are classified as a Consumer in relation to the activity in which the complaint relates will now be an eligible complainant under DISP 2.7.9A (from 9 July 2015).

It should be noted that in order for a professional client to fall under the scope of the new DISP rules, and under the definition of a ‘Consumer’, for the purposes of the arrangements between them and the investment manager, they need to be “a natural person acting for purposes outside their trade, business or profession”’.

The new DISP rules allow for individuals classified as professional clients to have access to complaints, not just on grounds of their general business orientation, but on a case-by-case basis taking into account their position in a given deal, therefore affording them better consumer protection in the industry as a whole.

2. Summary resolutions

“Summary Resolutions” are being introduced, whereby if a firm has dealt with a complaint informally and considers such a complaint to be resolved it will need to report this to the complainant (the requirements for Summary Resolutions can be found in DISP.15.4). Such Summary Resolutions will also need to include a notice to clients informing them of their right to turn to the FOS if they are dissatisfied with the firm’s internal complaint handling procedure.

So how will this impact investment firms and their arrangements?

  • firms will need to keep clients informed of their right to refer their complaint to the FOS, free of charge, within six months of receiving a summary resolution; and
  • firms will need to reflect the wider scope of complaint eligibility in their complaints procedures and also notify any professional clients they might be in business with, which fall within the ‘Consumer’ definition, of their right to submit complaints to the FOS. This will involve evaluating which clients fall under the scope of ‘consumers’.

In regards to timing and record keeping of the complaints:

  • there will be a new return format (a link to which can be found here) which firms can use from 30 June 2016; and
  • firms will need to start recording their informally resolved complaints and summary resolutions from 6 months before the return date and ensure that they can reflect the level of detail which is required in the new returns format.

As a result of the above changes, here are some further points for firms to consider internally:

  • firms will need to have procedures in place for staff reporting complaints that have been resolved via summary resolution;
  • firms will need to create a format for their summary resolution statements; and
  • firms will need to consider how the wider eligible complainant definition impacts on their business arrangements and how their agreements and business communications need to be amended to reflect this.

To see the FCA’s PS15/19 consultation paper on improving complaints handling, please follow this link.

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


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