New regulations affecting the way complaints about IFAs are handled will come into force on 9 July 2015. The move will ensure that firms can meet the requirements of the European Union’s Alternative Dispute Resolution (ADR) Directive. The ADR Directive is a new European law which provides alternative ways of resolving contractual disputes between consumers and businesses.
In the UK complaints about IFAs are handled by the Financial Ombudsman Service (FOS), which already meets many of the requirements of the ADR Directive. Last December, the Financial Conduct Authority (FCA) and FOS consulted on changes to the FCA’s dispute resolution rules to ensure that the requirements of the ADR Directive are met in full. New rules were published in April, which will come into force on 9 July.
According to the FCA’s Regulation Round-up, the main changes to the rules are as follows:
- The ombudsman service will be able to consider complaints where the firm has not investigated the complaint, but only if both the firm and the consumer consent.
- Firms will be able to consent to the ombudsman service considering a complaint if it is referred outside the relevant time limits
- The definition of ‘eligible complainant’ will be extended to include professional clients and eligible counterparties, where the person is an individual acting for purposes outside his trade, business, craft or profession.
“The changes to the way complaints are handled by the FOS could be significant, and IFAs must take all complaints extremely seriously,” said James Burgoyne, Director – Claims & Technical, Brunel Professional Risks. “A minor issue could quickly become a claim for negligence if handled badly.”
“As well as following the rules set out by the FCA, firms should have their own risk management procedures in place for minimising the risk of complaints and handling them promptly if any occur. IFAs should consider informing their insurer whenever they receive a complaint, and should certainly notify whenever a complaint to the Ombudsman occurs, or they may not have the protection of their professional indemnity insurance. If any of our IFA clients are in any doubt whether they should notify their insurer about an issue, they should contact us for guidance.”
Further information about the changes have been published by the FCA and FOS.