New FSA regulations on complaint handling are more onerous for the broker. Peter Farmer provides a summary of some of the key features
Most UK brokers will have had to revise and update their complaint handling procedures following the introduction of the FSA's new regulatory regime. The new rules are intended to ensure that complaints are handled fairly, effectively and promptly - and that they are resolved at the earliest possible opportunity, thereby reducing the number that need to be referred to the Financial Ombudsman Service (FOS).
It is important to note that the new rules are more onerous for the broker, and that firms should ensure they have proper procedures in place to support the FSA's requirements.
The new regulations put the onus on the broker to establish appropriate internal complaint handling procedures that accurately reflect both the letter and intent of the new regulations. To be compliant, all companies must have documented their internal complaints handling procedures. These must cover how their employees receive and respond to complaints, how complaints should be investigated, and how and when complainants should be advised of their right of recourse to the FOS.
Brokers need to be able to demonstrate that these procedures are appropriate to the scale, scope and structure of their company's operations and the number and type of complaints received. Common types of complaint include:
As a minimum, brokers' internal procedures must cover the handling of any expression of dissatisfaction from any eligible complainant, whether written or oral, whether justified or not, in relation to the firm's provision of, or failure to provide a financial service.
Forms of complaint excluded from the specific regulations are those that do not involve any allegation of financial loss, material distress or inconvenience suffered by the complainant; those relating to activities falling outside the jurisdiction of the FOS; those resolved before close of business on the next working day; and those made by or on behalf of anyone other than an eligible complainant.
Eligible complainants include private individuals or their representatives, and businesses, charities or trusts with a turnover/annual income/net asset value respectively of under £1m. The definition includes potential as well as current customers where the complaint concerns failure to act on the complainant's behalf.
Internal complaints handling procedures should be clearly set out and must be made available to eligible complainants either at or immediately after the point of sale. They can be incorporated within other documentation such as an initial disclosure document, policy summary or the policy document itself.
A copy of the procedures should also be supplied to any eligible complainant on receipt of a complaint - unless it has been resolved by the end of the following working day. Signage must also be displayed in each branch or sales office indicating that the firm is covered by the FOS.
The regulations state that complaints must be investigated by an employee with an appropriate level of competence - where appropriate someone not directly involved in the original complaint. The person charged with responding to complaints should have the authority to resolve them - including offering redress where appropriate - or have ready access to someone with such authority. Guidance as to what form of redress is appropriate may be sought from FSA or FOS publications. This could range from a simple apology to a financial payment including a reasonable rate of interest.
Regardless of whether any dedicated complaint-handling unit has been created, all employees must be familiar with the firm's internal complaint handling procedures and act in accordance with their provisions. There should be appropriate management controls in place to see that all complaints are handled fairly, consistently and promptly, to monitor the number and type of complaints, and to take remedial action as appropriate.
Complainants must receive a written acknowledgement of their complaint within five working days. Where the complaint can be swiftly resolved, this acknowledgement may be combined with a final response.
Where a complaint cannot be settled this quickly, the firm is obliged to send a final or holding response (clearly indicating why the firm is not yet in a position to resolve the complaint) within four weeks.
A final or other response (detailing why the firm is still not able to resolve the complaint) must be provided within eight weeks. At this stage the complainant must be advised that they may refer their complaint to the FOS if they are dissatisfied with either the final response or the firm's delay in providing one, and that they have six months in which to do so.
Records must be kept of all complaints received by the firm for a minimum of three years following receipt. These records must include the name of the complainant, the substance of the complaint and details of all correspondence, including offers of redress.
A report must be submitted to the FSA twice yearly detailing the total number of complaints received and also the number of complaints outstanding at the beginning and end of the reporting period.
A complaint is deemed to be closed when a final response letter is sent or when the complainant accepts in writing the firm's decision.
Regular reviews of complaints received and actions taken as a result should be carried out and documented to show that the firm is taking reasonable care to organise its affairs responsibly and effectively through adequate risk management systems.
Properly recording and dealing with complaints should not be seen as something done purely to satisfy the regulator. The information generated can be trended, analysed and acted upon to help brokers run a more professional, successful and ultimately profitable business. IT
' Peter Farmer is director of Searchlight Solutions
Full details of the new regulations can be found in the Dispute Resolution: Complaints Sourcebook (DISP) within the FSA Handbook