Investigation of complaints against the FSA

The Complaints Scheme, which includes a central role for an independent Complaints Commissioner, is an integral part of the FSAs wider accountability framework and will apply to complaints about the FSAs exercise of powers under the Financial Services and Markets Act.

The scheme will operate from 1 September i.e before N2, the date on which the main elements of the Act come into effect. The scheme will therefore be able to deal with complaints about the FSAs exercise of its powers under the Act before N2 such as applications by firms for authorisation. (The Treasury has said that N2 will be no later than the end of November).

The Complaints Scheme, which has been finalised after a consultation period, covers the procedure for inquiring into allegations of misconduct by the FSA arising from the way in which it carries out its functions other than its legislative functions. It covers complaints alleging mistakes and lack of care, unreasonable delay, unprofessional behaviour, bias and lack of integrity. Complaints from firms, individuals within firms and from consumers will be covered.

The Commissioner will have the resources to conduct full investigations and he can recommend that the FSA makes a compensatory payment if he upholds a complaint. He will publish an Annual Report on investigations concluded by him during the year and may also publish individual reports if he considers there are matters which should be brought to public attention.

The FSA is also consulting today on its proposals for dealing with pre-N2 complaints in a number of areas:

• Actions or inaction by the FSA before N2 in relation to its responsibilities under the Financial Services Act 1986;
• Actions or inaction by the FSA between 1 June 1998 and N2 under the Banking Act1987;
• Actions or inaction by the self-regulating organisations (IMRO, SFA and PIA) before N2.

Responses to the Consultation Paper should be sent to the FSA by 15 June.

Notes for editors

1. CP 93 Investigation of complaints against the FSA: Feedback on CP 73 and final text can be found on the FSAs Website www.fsa.gov.uk.

2. The Financial Services and Markets Act (Schedule 1 - paragraphs 7 and 8) requires the FSA to set up a Complaints Scheme for investigation of complaints against itself. In line with the provisions of the FSM Act the FSA will not normally investigate complaints under the scheme which could be dealt with more appropriately in some other way, for example by referring the matter to the Financial Services and Markets Tribunal or by institution of other legal proceedings.

3. A complaint will be defined as any expression of dissatisfaction about the manner in which the FSA has carried out its statutory functions other than its legislative functions.

4. The scheme envisages that there may be two distinct stages for handling each complaint. In the first stage the FSA will carry out an initial investigation of any complaint which in its view falls within the Scheme. These investigations will be carried out by a member of staff of appropriate seniority who has not been involved in the issue complained of. The aim will be to resolve the matter to the satisfaction of the complainant. Where the FSA finds a complaint well-founded, it will consider how best to put the matter right. This can include apologising to the complainant, explaining what went wrong, putting in place procedures to avoid a recurrence of the error, and making a compensatory payment.

5. If a complainant is dissatisfied with the outcome of the FSA''s investigation of his case or how it has been handled, he can require the FSA to refer the complaint to the Commissioner. Under this second stage of the process, the Commissioner''s role will include conducting a full and thorough inquiry into any complaint which he decides to investigate; reporting to the complainant and the FSA on the results of his investigation; and in appropriate cases publishing his report (or any part of it) and requiring the FSA to publish the whole or part of its response. He can also recommend that the FSA make a compensatory payment to a complainant.

6. The appointment of the Commissioner requires Treasury approval, and to enhance the his independence, a Panel consisting of the non-executive Deputy Chairman of the FSA, the Chairman of the Financial Services Practitioner Forum, the Chairman of the Financial Services Consumer Panel and a former Civil Service Commissioner acting in a personal capacity will advise the FSA on the selection and appointment of the Commissioner.

7. The Commissioners Annual Report may include information on trends in the subject matter of complaints and on the general lessons which he considers the FSA should learn. The FSA will respond to the Commissioners points in its own Annual Report which will also include:
   • data on complaints which the FSA has investigated itself including details of compensatory payments made
   • data on complaints which the FSA decided not to investigate
   • a summary of the FSAs responses to critical reports by the Commissioner.

8. The FSA intends to issue a short guidance booklet which will explain, in a user-friendly way, how the complaints handling arrangements will work.

9. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; the protection of consumers; and fighting financial crime.

10. The FSA aims to maintain efficient, orderly and clean financial markets and help retail consumers achieve a fair deal.