RegulationJun 18 2015

FCA dominates complaints data - but not one upheld

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FCA dominates complaints data - but not one upheld

Complaints about the Financial Conduct Authority represented just over half of all complaints the Complaints Commissioner for Financial Services received in the last financial year.

The commissioner’s annual report for the year ended 31 March, revealed it received 116 new complaints, up 16 per cent from the previous year, with 61 of these being about the FCA and a further 11 about its predecessor the Financial Services Authority.

However, of these FCA complaints, not one was upheld. Only one complaint was from an individual financial adviser.

In terms of other regulatory bodies complained about, the Prudential Regulation Authority had two and the Bank of England one complaint. The remainder related to the likes of the ombudsman and financial services firms and fall outside the commissioner’s purview.

Complaints commissioner Antony Townsend revealed in the report that 38 formal investigations had been launched over the year, with nine of the eventual reports including criticism of certain aspects of the FCA investigation.

Mr Townsend concluded that some of the issues drawn out in these cases reflect a tendency to be over-cautious about admitting error and to be too ready to exclude matters too early in the process.

“In particular, there is a danger that complaints may be rejected on the grounds that the regulator was simply exercising its discretion, without sufficiently testing that the exercise of the discretion was within the limits of reasonableness.”

The regulator’s eventual decision was overturned in only three cases and the report states that the regulatory complaints system is “working well”.

Another category of cases, which has been a feature of the scheme in previous years, was complaints about the way in which the FCA has handled administrative applications from regulated firms, including the imposition of fines for late returns and delays in processing.

Mr Townsend pointed out that none of these were upheld as the complainants were unable to demonstrate any good reason why they should be exempted from the requirements imposed upon other firms.

In relation to formal investigations, the large majority of these related in various ways to concerns that the FCA’s regulatory regime was insufficiently rigorous, ranging from complaints about policy in relation to loan interest rates, through to allegations that the FCA had failed to act sufficiently firmly.

Three of the cases where criticism was made involved inadequate explanation of the conclusions, while four were critical of particular outcomes, one was focused on an inadequately handled investigation and one on failing to address the complaint fully.

Of the three overturned decisions, in the first of these the complainant alleged that advice being given under a government sponsored scheme was not being properly regulated.

The FCA twice claimed the matter was not within its remit, before deciding it should investigate the matter. It rejected the complaint about its handling of the matter on the grounds that it fell outside the scheme, while offering an explanation which failed to be open about the extent of its errors.

The commissioner recommended a proper apology and a payment of £100 to reflect the failings.

In the second case, an investor had been given an erroneous assurance by the FSA’s contact centre that his investment would be safeguarded under the Financial Services Compensation Scheme.

The report states the “evidence was clear”, but the FCA declined to offer full compensation saying it would be wrong to do so.

The third case, which related to the supervision and enforcement activity of the FSA, was the most serious, according to Mr Townsend.

“This was a complex matter, relating to a prolonged period of supervision visits and enforcement action by the FSA. The FCA, which inherited the complaint, concluded that an apology was owed for some delays, but nothing further.”

The regulator’s view was that it was not possible to conclude, on the balance of probabilities, that the behaviour of the FSA’s investigation team fell below an acceptable standard, but the commissioner rejected this view.

peter.walker@ft.com