DISP Dispute Resolution: Complaints

Part

DISP Dispute Resolution: Complaints

Printed on: 05/05/2025

Rulebook at: 01/06/2005

Chapters

DISP INTRO Introduction
DISP 1 Complaint handling procedures for firms
DISP 2 Jurisdiction of the Financial Ombudsman Service
DISP 3 Complaint handling procedures of the Financial Ombudsman Service
DISP 4 Standard terms
DISP 5 Funding Rules
DISP App 1 Relevant Existing Complaints
DISP App 2 Handling
Mortgage Endowment Complaints
Transitional Provisions and Schedules

DISP INTRO

Introduction

DISP INTRO 1

Introduction

01/12/2004

Access for retail consumers to mechanisms for dealing with complaints about financial services firms is a key part of the regulatory regime. The Act gives the FSA the power to make rules relating to the handling of complaints by firms and provides for the establishment of an independent dispute resolution scheme (the Financial Ombudsman Service) to resolve complaints about financial services firms quickly and with minimum formality. The body established to administer and operate this scheme (the "scheme operator") is the Financial Ombudsman Service Limited ("FOS Ltd").
This module of the FSA Handbook contains the rules and guidance relating to the handling of complaints by firms and to the operation of the Financial Ombudsman Service. Responsibility for the rules relating to the Financial Ombudsman Service is shared under the Act between the FSA and the FOS Ltd, with those rules and other requirements written by the FOS Ltd being subject to approval by, or the consent of, the FSA.
Under the Act, the Financial Ombudsman Service comprises two jurisdictions: (a) The Compulsory Jurisdiction covers firms which are required to participate in the Financial Ombudsman Service in respect of complaints about activities specified by the FSA [and unauthorised persons subject to the Compulsory Jurisdiction in relation to relevant complaints];(b) The Voluntary Jurisdiction can cover financial services activities not included in the Compulsory Jurisdiction. Both firms and unauthorised firms can participate in the Voluntary Jurisdiction by contractual agreement with the FOS Ltd (in accordance with the Standard Terms - see below) and are known as VJ participants.

01/12/2004

Although the authority to make the rules relating to the Compulsory Jurisdiction and the Voluntary Jurisdiction derives from different sections of the Act, the provisions have been co-ordinated to ensure that, wherever possible, they are identical.

01/12/2004

Chapter 1: Complaint handling procedures for firms
These rules set out the complaint handling procedures which firms capable of giving rise to an eligible complaint under the Compulsory Jurisdiction (see Chapter 2) must establish. They are made by the FSA under section 138 of the Act and paragraph 13 of Schedule 17 to the Act. These rules, with some exceptions, are applied to VJ participants by contract via the Standard Terms set by the FOS Ltd (Chapter 4).

01/12/2004

Chapter 2: Jurisdiction Rules
These rules set out the scope of the Compulsory Jurisdiction and the Voluntary Jurisdiction of the Financial Ombudsman Service. They specify who can refer a complaint to the Financial Ombudsman Service and the time limits for doing so, as well as which activities are covered by the Compulsory Jurisdiction and the Voluntary Jurisdiction. The rules also set out the territorial scope of the Financial Ombudsman Service. They are relevant to consumers who may wish to refer complaints to the Financial Ombudsman Service; to firms which are subject to the Compulsory Jurisdiction; to unauthorised persons who are subject to the Compulsory Jurisdiction in relation to relevant complaints; to VJ participants and to the Ombudsman himself. The rules relating to the scope of the Compulsory Jurisdiction are made by the FSA (under section 226 of the Act); the rules relating to the scope of the Voluntary Jurisdiction are made by the FOS Ltd, with FSA approval (under section 227). The rules relating to the time limits for referring a complaint to the Financial Ombudsman Service are made by the FSA under paragraph 13 of Schedule 17 to the Act and are applied to VJ participants by contract via the Standard Terms set by the FOS Ltd.

01/12/2004

Chapter 3: Complaint handling procedures of the Financial Ombudsman Service
These rules apply to the Ombudsman, to firms, and to unauthorised persons who are subject to the Compulsory Jurisdiction in relation to relevant complaints. They are also relevant to complainants. They set out how the FOS Ltd and, in particular, the Ombudsman will handle complaints under the Financial Ombudsman Service. For the purposes of the Compulsory Jurisdiction, they comprise the scheme rules and the costs rules (made by the FOS Ltd, with FSA consent or approval, under paragraph 14 of Schedule 17 and section 230 respectively) and rules made by the FSA on the kinds of loss or damage that can be compensated, including the maximum amount which can be awarded (s229). These procedural rules are applied to VJ participants via the Standard Terms.

01/12/2004

Chapter 4: The Standard Terms
The Standard Terms are made, with FSA approval, by the FOS Ltd under paragraph 18 of Schedule 17 to the Act and are the contractual terms by which VJ participants participate in the Voluntary Jurisdiction.

01/12/2004

Appendix 1: Relevant Existing Complaints
The Ombudsman Transitional Order, made by HM Treasury under sections 426-428 of the Act, extends the scope of the Financial Ombudsman Service to enable it to deal with complaints about pre-commencement business where these could have been handled by a former scheme ("relevant complaints") and makes special provision for the handling of these complaints.
It distinguishes between:
(a) relevant existing complaints (ie complaints referred to, but not determined by, a former scheme (other than the Personal Insurance Arbitration Service) before commencement (see article 2 of the Ombudsman Transitional Order); and
(b) relevant new complaints (ie complaints referred to the Financial Ombudsman Service after commencement which relate to a pre-commencement act or omission, in respect of which the firm was, immediately before commencement, subject to a former scheme) (see article 3 of the Ombudsman Transitional Order).
The Order enables the FOS Ltd, with only a few exceptions, to handle relevant new complaints in accordance with its new procedures, as set out in DISP 1 to 5 and these are covered in the main body of the DISP rules. Except as otherwise indicated, the term "complaint" in DISP 1 to 5 therefore includes a relevant new complaint.
However, the Ombudsman Transitional Order makes different provision for the handling of relevant existing complaints (ie complaints which the former schemes have partly completed at commencement). These complaints will be passed over to the Financial Ombudsman Service by the former schemes (except the Personal Insurance Arbitration Service) at commencement and the Ombudsman Transitional Order requires the FOS Ltd to complete the handling of these cases. However, it provides that the Financial Ombudsman Service must do this, in a significant number of respects, in accordance with the procedures of the relevant former scheme. The arrangements for dealing with these complaints are set out in DISP App 1. This describes the ways in which relevant existing complaints must be treated differently from other complaints dealt with under the Financial Ombudsman Service, but cross refers to the provisions in DISP 1 to 5, where appropriate. (DISP 1 explains how complaints which are partly completed by firms (as distinct from former schemes) at commencement are to be handled.)

01/12/2004

Appendix 2: FSA's guidance on handling mortgage endowment complaints
DISP App 2 contains FSA's guidance to firms on handling mortgage endowment complaints.

01/12/2004

DISP 1

Complaint handling procedures for firms

DISP 1.1

Application and Purpose

01/12/2004

Application

DISP 1.1.1

Subject to DISP 1.1.1A R, this chapter applies to every firm in respect of activities carried on from an establishment maintained by the firm (or its appointed representative) in the United Kingdom, except:

(1)

(a) a firm that is exempt under DISP 1.1.7 R;

(b) a UCITS qualifier;

(d) a credit union; or

(2) in relation to the Society of Lloyd's, members of the Society and managing agents, DISP 1 applies subject to DISP 1.7 (the Society of Lloyd's).

01/06/2005

DISP 1.1.1A

Where a firm has outsourced activities to a third party processor, DISP 1.1.1 G does not apply to the third party processor when acting as such, but applies to the firm which is taking responsibility for the acts and omissions of the third party processor in respect of the outsourced activities.

01/06/2005

DISP 1.1.2

This chapter is also relevant to those who might wish to refer a complaint to the Financial Ombudsman Service.

01/04/2002

DISP 1.1.3

Firms are responsible for ensuring their appointed representatives' compliance with DISP 1.

01/12/2004

DISP 1.1.4

(1) VJ participants are subject to DISP 1, except DISP 1.1.1 G, DISP 1.1.5 R and DISP 1.5(Record keeping and reporting), by contract under the standard terms as if they were firms (see DISP 4.2.2 R). DISP 1.2 applies to VJ participants only in relation to complaints about activities of the VJ participant specified in DISP 2.6.9 R. DISP 1.2 (Internal complaints handling procedures: general requirements) also applies to VJ participants elsewhere in the EEA under the extended jurisdiction set out in DISP 2.7.2 R.

(2) Rules and guidance relating to complaints handling by credit unions are contained in CRED 17.

01/04/2002

DISP 1.1.5

Except as otherwise specified, references to a "complaint" in this chapter include a complaint which is capable of becoming a relevant new complaint or a relevant transitional complaint.

31/10/2004

DISP 1.1.6

A complaint about pre-commencement investment business carried on by a firm which was regulated in respect of that business by a recognised professional body will be handled under the arrangements of that professional body, and is outside the scope of DISP.

01/04/2002

Exemption

DISP 1.1.7

(1) A firm which does not conduct business with eligible complainants and has no reasonable likelihood of doing so is exempt from DISP 1.2 - DISP 1.7, if:

(a) it has notified the FSA in writing that those conditions apply ; and

(b) the conditions in fact continue to apply.

(2) The exemption takes effect from the date on which the notice was received by the FSA.

(3) In (1), conducting business means carrying on any of the activities to which the rules in DISP 2.6 apply with or for persons who are eligible complainants under DISP 2.4.

01/04/2003

End of exemption

DISP 1.1.10

A firm which is exempt under DISP 1.1.7 R must notify the FSA in writing as soon as reasonably practicable if the conditions in DISP 1.1.7 R no longer apply.

01/04/2003

DISP 1.1.11

A firm to which the conditions in DISP 1.1.7 R no longer apply is subject to DISP 1.2 - DISP 1.7.

01/04/2002

Purpose

DISP 1.1.12

The purpose of this chapter is to set out the rules relating to the internal handling of complaints by firms, including the procedures which a firm must put in place; the time limits within which a firm must deal with a complaint; the referral of complaints, the records of a complaint which a firm must make and retain; and the requirements on a firm to report information about complaints to the FSA. This is to ensure that complaints are handled fairly, effectively and promptly, and resolved at the earliest possible opportunity, minimising the number of unresolved complaints which need to be referred to the Financial Ombudsman Service. This purpose is consistent with the FSA's consumer protection regulatory objective.

14/01/2005

DISP 1.2

Internal complaint handling procedures: general requirements

01/12/2004

DISP 1.2.1

A firm, A, must have in place and operate appropriate and effective internal complaint handling procedures (which must be written down) for:

(1) handling any expression of dissatisfaction, whether oral or written, and whether justified or not, from or on behalf of an eligible complainant about A's provision of, or failure to provide, a financial service; and

(2) referring to another firm, B, expressions of dissatisfaction about B's services, if A markets (or has marketed) B's financial services or if A's financial services are marketed by B.

14/01/2005

DISP 1.2.1A

If the expression of dissatisfaction is from, or on behalf of, a person who is not an eligible complainant, and relates to insurance mediation activity carried on by an insurance intermediary, then unless the insurance intermediary is an insurer, the insurance intermediary must have in place and operate appropriate and effective procedures for registering, and responding to, the expression of dissatisfaction.

14/01/2005

DISP 1.2.2

An eligible complainant is a person who would be eligible to refer a complaint to the Financial Ombudsman Service, as defined in DISP 2.4

01/04/2002

DISP 1.2.3

Firms are not obliged to restrict their internal complaint handling procedures to expressions of dissatisfaction from eligible complainants. They may, if they wish, also establish procedures for handling complaints from other customers.

01/04/2002

DISP 1.2.4

The internal complaint handling procedures should provide for:

(1) receiving complaints;

(2) responding to complaints;

(2A) referring complaints to other firms;

(3) the appropriate investigation of complaints; and

(4) notifying complainants of their right to go the Financial Ombudsman Service where relevant.

14/01/2005

DISP 1.2.5

When deciding what constitutes an appropriate complaint handling procedure (see DISP 1.2.1 R), a firm should have regard to:

(1) the type of business it undertakes;

(2) its size and organisational structure;

(3) the nature and complexity of the complaints it is likely to receive; and

(4) the likely number of complaints it will receive and have to investigate.

01/04/2002

DISP 1.2.6

(1) DISP 1.2.1 R does not prevent the use of a third party administrator for the purposes of handling complaints.

(2) It is acceptable for two or more firms to set up arrangements, such as a one-stop shop for complaints handling under a service level agreement, provided that this still secures for complainants an equivalent standard of service and, if appropriate, redress. Any such arrangements should be made clear to an eligible complainant.

14/01/2005

DISP 1.2.7

In establishing their internal complaint handling procedures, firms may wish to take account of BS ISO 10002:2004 'Quality management. Customer satisfaction. Guidelines for complaints handling in organizations'. This is available from BSI. To purchase copies contact them directly on 020 8996 9001 or orders@bsi-global.com.

01/04/2002

DISP 1.2.8

The internal complaint handling procedures should enable complainants to make a complaint by any reasonable means (for example, letter, telephone, e-mail or in person).

01/04/2002

Publicising the procedures

DISP 1.2.9

A firm must:

(1) Refer eligible complainants in writing to the availability of its internal complaint handling procedures at, or immediately after, the point of sale;

(2) publish details of its internal complaint handling procedures, supply a copy on request to an eligible complainant, and supply a copy automatically to the complainant when it receives a complaint from an eligible complainant (unless the complaint is resolved by close of business on the next business day); and

(3) display in each of its branches or sales offices to which eligible complainants have access a notice indicating that it is covered by the Financial Ombudsman Service.

01/09/2003

DISP 1.2.10

The requirements in DISP 1.2.9 R(1)-(3) relate to the internal complaints procedures required by DISP 1.2.1 R.

01/04/2002

DISP 1.2.11

In order to comply with DISP 1.2.9 R(1), a firm may include reference to its complaint handling procedures in contractual documentation, for example:

(1) (where the firm is subject to the requirements in COB) in a terms of business letter, key features document or client agreement;

(2) (where the firm is subject to the requirements in ICOB), as part of status disclosure (see ICOB 4.2 and ICOB 8.3), in a policy summary or policy document; or

(3) (where the firm is subject to the requirements in MCOB) in an initial disclosure document or offer document.

14/01/2005

DISP 1.2.12

Where a complaint is also subject to the more detailed requirements in DISP 1.4 - DISP 1.6, the firm may send out a copy of its complaint handling procedures (as required by DISP 1.2.9 R (2)) at the same time as the acknowledgement required by DISP 1.4.1 R.

01/04/2002

DISP 1.2.13

For the purposes of satisfying DISP 1.2.9 R(2) a firm may wish to produce a leaflet which summarises its internal complaint handling procedures.

01/04/2002

DISP 1.2.14

Firms' literature and correspondence relating to complaints should be in clear and plain language.

01/04/2002

DISP 1.2.15

A firm may also, if it wishes to do so, disclose the fact that it is covered by the Financial Ombudsman Service by including the Financial Ombudsman Service logo in any marketing literature or correspondence directed at eligible complainants, provided that it does so in a way which is not misleading.

01/04/2002

Particular matters for which procedures must make provision

DISP 1.2.16

A firm's internal complaint handling procedures under DISP 1.2.1 R must make provision for:

(1) complaints to be investigated by an employee of sufficient competence who, where appropriate, was not directly involved in the matter which is the subject of the complaint;

(2) the person charged with responding to complaints to have the authority to settle complaints (including the offering of redress where appropriate) or to have ready access to someone who has the necessary authority; and

(3) responses to complaints to address adequately the subject matter of the complaint and, where a complaint is upheld, to offer appropriate redress.

01/04/2002

Providing compensation

DISP 1.2.17

Where a firm decides that redress is appropriate, a firm must provide a complainant with fair compensation for any acts or omissions for which it was responsible and comply with any offer of redress which the complainant accepts.

01/04/2002

DISP 1.2.18

In deciding whether or not to accept a complaint and what would be appropriate redress, firms may wish to consider any relevant guidance published by the FSA, the Financial Ombudsman Service or by any of the former schemes.

01/04/2002

DISP 1.2.19

Appropriate redress will not always involve financial redress. It may, for example, simply involve an apology. Where financial redress is deemed appropriate, it may include a reasonable rate of interest.

01/04/2002

DISP 1.2.20

DISP App 2 contains guidance to firms on the approach to assessing financial loss and appropriate compensation in circumstances where a firm regards a complaint in relation to the sale of an endowment policy (which is sold for the purposes of repaying a mortgage) as justified.

01/04/2002

Using the procedures

DISP 1.2.21

A firm must take reasonable steps to ensure that all relevant employees (including employees of appointed representatives) are aware of the firm's internal complaint handling procedures and must endeavour to ensure that they act in accordance with them.

01/04/2002

DISP 1.2.22

A firm must put in place appropriate management controls and take reasonable steps to ensure that in complying with DISP 1.2.1 R it handles complaints fairly, consistently and promptly and that it identifies and remedies any recurring or systemic problems, as well as any specific problem identified by a complaint.

01/04/2002

DISP 1.3

Internal complaint handling procedures: additional requirements

01/12/2004

DISP 1.3.1

DISP 1.4 - DISP 1.6 contain additional requirements, concerning time limits, record keeping and reporting and cooperation with the Ombudsman, for handling complaints, unless DISP 1.3.3 R applies.

01/04/2002

DISP 1.3.2

DISP 1.4 - DISP 1.6 also apply to any complaints that are capable of becoming relevant new complaints or relevant transitional complaints, unless DISP 1.3.3 R applies.

31/10/2004

DISP 1.3.3

DISP 1.4 - DISP 1.5 do not apply:

(1) where the firm has taken reasonable steps to determine, and has determined, that the complaint:

(a) is not made by, or on behalf of, an eligible complainant; or

(b) does not relate to an activity of that firm (or of any other firm with whom that firm has some connection in marketing financial services) which comes under the jurisdiction of the Financial Ombudsman Service; or

(c) does not involve an allegation that the complainant has suffered, or may suffer, financial loss, material distress or material inconvenience; or

(2) where the complaint has been resolved by close of business on the business day following its receipt.

14/01/2005

DISP 1.3.3A

In order to comply with DISP 1.3.3 R(2), when a complaint is received on any day other than a business day, or after close of business on a business day, a firm can treat the complaint as received on the next business day.

01/09/2003

DISP 1.3.4

Under the Ombudsman Transitional Order and the Mortgage and General Insurance Complaints Transitional Order, a complaint received by a firm, either before or after commencement, relating to an act or omission relating to business which was not a regulated activity at the time of the matter complained of is capable of becoming a relevant new complaint or a relevant transitional complaint. A firm is expected to handle such complaints in accordance with DISP 1.

31/10/2004

DISP 1.3.5

Financial loss includes consequential or prospective loss, in addition to actual loss. For example, a complaint may involve an allegation that the complainant may suffer financial loss which has not yet crystallised because of the type of product involved (for example, pensions, endowments etc).

01/04/2002

DISP 1.4

Time limits for dealing with a complaint

01/12/2004

Written acknowledgement within five business days

DISP 1.4.1

A firm must send a written acknowledgement of a complaint to the complainant within five business days of its receipt, giving the name or job title of the individual handling the complaint for the firm (together with details of the firm's internal complaint handling procedures).

14/01/2005

DISP 1.4.2

A firm which is able to provide a final response within five business days of receipt of a complaint may combine its acknowledgement of the complaint with the final response. (For complaints which are subject to the FSAVC review, see DISP 1.4.15 R to DISP 1.4.17 G.)

01/04/2002

DISP 1.4.3

A firm should aim to resolve complaints at the earliest possible stage.

01/04/2002

Early resolution of complaints

DISP 1.4.3A

DISP 1.4.4 R to DISP 1.4.6 R do not apply if the complainant has already indicated in writing acceptance of a response by the firm, provided that the response informed the complainant how to pursue his complaint if he remained dissatisfied.

01/09/2003

DISP 1.4.3B

DISP 1.4.3A R recognises that the complainant may accept the firm's response at any time during the complaint process and that this may resolve the complaint, even when the firm has not issued a final response. The firm's response need not have referred to the Financial Ombudsman Service, but should have explained how the complaint would be progressed by the firm if the complainant remained dissatisfied.

01/09/2003

Final or holding response within four weeks

DISP 1.4.4

A firm must, within four weeks of receiving a complaint, (unless DISP 1.4.3A R or DISP 1.4.9 R applies) send the complainant either:

(1) a final response; or

(2) a holding response, which explains why it is not yet in a position to resolve the complaint and indicates when the firm will make further contact (which must be within eight weeks of receipt of the complaint).

01/09/2003

Final or other response within eight weeks

DISP 1.4.5

A firm must, by the end of eight weeks after its receipt of a complaint, (unless DISP 1.4.3A R or DISP 1.4.9 R applies) send the complainant either:

(1) a final response; or

(2) a response which:

(a) explains that the firm is still not in a position to make a final response, gives reasons for the further delay and indicates when it expects to be able to provide a final response; and

(b) informs the complainant that he may refer the complaint to the Financial Ombudsman Service if he is dissatisfied with the delay and encloses a copy of the Financial Ombudsman Service's explanatory leaflet.

01/09/2003

Firms with two-stage complaints procedures

DISP 1.4.9

Where, within eight weeks of receiving a complaint, the firm sends the complainant a written response which:

(1) offers redress (whether or not it accepts the complaint) or rejects the complaint and gives reasons for doing so;

(2) informs the complainant how to pursue his complaint with the firm if he remains dissatisfied;

(3) refers to the ultimate availability of the Financial Ombudsman Service if he remains dissatisfied with the firm's response; and

(4) indicates that it will regard the complaint as closed if it does not receive a reply within eight weeks;

the firm is not obliged to continue to comply with DISP 1.4.4 R or DISP 1.4.5 G unless the complainant indicates that he remains dissatisfied, in which case, the obligation to comply with DISP 1.4.5 G resumes.

01/04/2002

DISP 1.4.10

If the complainant takes more than a week to reply to a written response of the kind described in DISP 1.4.9 R, the additional time in excess of a week will not count for the purposes of the time limits in DISP 1.4.4 R - DISP 1.4.6 R.

01/04/2002

DISP 1.4.11

(1) DISP 1.4.9 R caters for the situation where a firm's complaints procedures provide for a complainant who is dissatisfied with the firm's response to refer the complaint back to the firm again or to the firm's head office before a final response is issued.

(2) Such firms are subject to the time limits in DISP 1.4.4 R to DISP 1.4.6 R in the same way as any other firm. However, DISP 1.4.9 R recognises that some complainants may never respond to a firm or may take a long time to do so.

(3) Provided that the firm has sent a letter which complies with the conditions in DISP 1.4.9 R within eight weeks of receiving the complaint:

(a) if the complainant does not reply at all, the firm is not required to send a final response;

(b) if the complainant does not reply within eight weeks of the firm's letter, DISP 1.5.7 R(3) enables the firm to treat the complaint as a closed complaint for the purposes of the reporting requirement in DISP 1.5.4 R;

(c) if the complainant does reply (within or after eight weeks), the firm is required to continue to comply with DISP 1.4.5 G, and the time limits in DISP 1.4.5 G therefore resume. But DISP 1.4.10 R allows the firm to discount, for the purposes of the time limits in DISP 1.4.4 R to DISP 1.4.6 R, any time in excess of a week taken by the complainant to reply.

(4) The FSA expects that firms operating a two-stage complaints procedure will wish to provide complainants with easy access to the second stage of the process (for example, by referring complaints on to the next stage for them if they remain dissatisfied).

01/04/2002

The final response

DISP 1.4.12

When a firm sends a complainant its final response, the final response must:

(1) inform the complainant that he may refer the complaint to the Financial Ombudsman Service if he is dissatisfied with the final response and that he must do so within six months; and

(2) enclose a copy of the Financial Ombudsman Service's explanatory leaflet (unless it has already done so under DISP 1.4.5 G(2)(b)).

01/04/2002

DISP 1.4.13

Copies of the Financial Ombudsman Service's explanatory leaflet may be reproduced under licence or can be obtained from the Financial Ombudsman Service.

01/04/2002

DISP 1.4.14

Under DISP 1.4.5 G and DISP 1.4.6 R:

(1) a complainant can refer his complaint to the Financial Ombudsman Service if he receives a final response with which he is dissatisfied or the firm has had at least eight weeks to resolve the complaint and has failed to do so in that time; the complainant may decide whether to give the firm more time before exercising any right he may have to refer a complaint to the Financial Ombudsman Service;

(2) the six month time limit within which a complainant must refer a complaint to the Financial Ombudsman Service begins at the date when the final response is sent by the firm.

01/04/2002

Complaints subject to the FSAVC review

DISP 1.4.15

DISP 1.4.1 R to DISP 1.4.14 G and DISP 1.5.1 R and DISP 1.5.4 R do not apply where the complaint is subject to a review directly or indirectly under the terms of the policy statement for the review of specific categories of FSAVC business issued by the FSA on 28 February 2000.

01/04/2002

DISP 1.4.16

Where DISP 1.4.15 R applies, the firm must, if the complainant remains dissatisfied on completion of that review, treat that expression of dissatisfaction as a complaint and comply with DISP 1.4.1 R, DISP 1.4.14 G, DISP 1.5.1 R and DISP 1.5.4 R.

01/04/2002

DISP 1.4.17

The effect of DISP 1.4.15 R is to relieve the firm of the obligation to comply with the requirements and time limits for replying to complainants, and the record-keeping and reporting requirements in DISP 1.5.1 R and DISP 1.5.4 R, where a complaint is subject to the FSAVC review. However, if a complainant remains dissatisfied with the outcome of the review, DISP 1.4.16 R requires the firm to treat this as a complaint and comply with these requirements just as it would in respect of any other complaint. Firms are therefore required to record and report such complaints only where they receive a complaint about the outcome of the review.

01/04/2002

Referring complaints

DISP 1.4.18

(1) A firm which has reasonable grounds to be satisfied that another firm may be solely responsible for the fault alleged in a complaint may refer the complaint to that other firm, but if it does so it must:

(a) refer the complaint promptly and in any event within five business days of the date on which it became satisfied that such other firm may be responsible for the subject matter of the complaint;

(b) make the referral using a durable medium; and

(2) A firm which has reasonable grounds to be satisfied that another firm may be jointly responsible for the fault alleged in a complaint, may refer the complaint to that other firm but if it does so it must:

(a) refer the complaint promptly and in any event with five business days of the date on which it became satisfied that such other firm may be jointly responsible for the subject matter of the complaint;

(b) make the referral on a durable medium;

(d) comply with the obligations in DISP as to the investigation of that part of the complaint that is the firm's responsibility and, as soon as possible, inform the complainant of the outcome by a final response.

14/01/2005

Dealing with a referred complaint

DISP 1.4.19

When a firm receives a complaint referred to it under DISP 1.4.18 R, the complaint is treated for the purposes of DISP as if made directly to that firm, and as if received by it when the referral was received.

14/01/2005

DISP 1.4.20

On receiving a complaint referred by another firm, the standard time limits will apply from the date on which the firm receives the referral. In particular, DISP 1.4.1 R requires the firm to send a written acknowledgement to the complainant within five business days. A firm should copy this acknowledgement to the firm which made the referral.

14/01/2005

DISP 1.5

Record keeping and reporting

01/12/2004

Making and retaining records of complaints

DISP 1.5.1

A firm must make and retain records of complaints subject to DISP 1.4-DISP 1.6 for a minimum period of three years from the date of its receipt of the complaint.

01/04/2002

DISP 1.5.2

The records required by DISP 1.5.1 R are for the purposes of monitoring by the FSA and also to ensure that the firm is able to cooperate, as necessary, with the Financial Ombudsman Service. They should include:

(1) the name of the complainant;

(2) the substance of the complaint;

(3) any correspondence between the firm and the complainant, including details of any redress offered by the firm; and

(4) documentation relating to the referral of a complaint under DISP 1.4.18 R.

14/01/2005

DISP 1.5.3

DISP 4.2.3 R covers record keeping by VJ participants.

01/04/2002

Reporting complaints to the FSA

DISP 1.5.4

A firm must provide the FSA, twice a year, with a report in the format set out in DISP 1 Annex 1R which contains (for the relevant reporting period) information about:

(1) the total number of complaints subject to DISP 1.4 to DISP 1.6 received by the firm, broken down according to the categories and in respect of each of the generic product types described in DISP 1 Annex 1R which are relevant to the firm;

(2) the total number of complaints subject to DISP 1.4 - DISP 1.6 closed by the firm:

(a) within four weeks or less of receipt;

(b) within four to eight weeks of receipt; and

(3) the total number of complaints subject to DISP 1.4 - DISP 1.6:

(a) upheld by the firm in the reporting period;

(b) that the firm knows have been referred to, and accepted by, the FOS in the reporting period;

(d) outstanding at the end of the reporting period; and

(4) the total amount of redress paid in respect of complaints subject to DISP 1.4 to DISP 1.6 during the reported period.

01/04/2005

DISP 1.5.5

For the purpose of DISP 1.5.4 R, upon completing the return, the firm should note that:

(1) Where a complaint could fall into more than one category, the complaint should be recorded in the category which the firm considers to form the main part of the complaint.

(2) Where a complaint has been upheld under DISP 1.5.4 R (3)(a), a firm should report any complaints to which it has given a final response which accepts the complaint, and, where appropriate, offers redress, even if the redress offered is disputed by the complainant. Where a complaint is upheld in part, a firm should treat the whole complaint as upheld for reporting purposes. Where a firm rejects a complaint, yet chooses to make an ex-gratia payment to the complainant, the complaint should be recorded as 'rejected'.

(3) Where a firm reports on the amount of redress paid under DISP 1.5.4 R (4), redress should be interpreted to include an amount paid, or cost borne, by the firm, where a cash value can be readily identified, and should include:

(a) amounts paid for distress and inconvenience;

(b) a free transfer out to another provider which transfer would normally be paid for;

(d) interest on delayed settlements;

(e) waiver of an excess on an insurance policy; and

(f) payments to put the consumer back into the position the consumer should have been in had the act or omission not occurred.

(4) Where a firm reports on the amount of redress paid under DISP 1.5.4 R (4), such redress should not, however, include repayments or refunds of premiums which had been taken in error (for example where a firm had been taking, by direct debit, twice the actual premium amount due under a policy). The refund of the overcharge would not count as redress.

01/04/2005

DISP 1.5.6

For the purposes of DISP 1.5.4 R:

(1) The relevant reporting periods are:

(a) the six months immediately following a firm's accounting reference date; and

(b) the six months immediately preceding a firm's accounting reference date.

(2) Reports are to be submitted to the FSA within 30 business days of the end of the relevant reporting period.

01/04/2005

Reporting: when is a complaint closed?

DISP 1.5.7

For the purpose of DISP 1.5.4 R (2), a closed complaint is a complaint:

(1) where the firm has sent a final response; or

(2) where the complainant has indicated in writing acceptance of the firm's earlier response; or

(3) where DISP 1.4.9 R applies, provided that the complainant has not responded to the firm within eight weeks of the written response referred to in that rule.

01/04/2002

DISP 1.5.8

Where a complaint is reported as closed under DISP 1.5.7 R (3) because the complainant has not replied to the firm within eight weeks of a written response which meets the requirements in DISP 1.4.9 R, the firm may treat the date of that response as the date when the complaint was closed for the purposes of the reporting requirements in DISP 1.5.4 R (2).

01/04/2002

Reporting: complaints subject to the FSAVC review

DISP 1.5.9

Where a complaint is subject to the FSAVC review, the record keeping and reporting requirements in DISP 1.5.1 R and DISP 1.5.4 R apply only where the complainant is dissatisfied with the outcome of that review (under DISP 1.4.15 R and DISP 1.4.16 R).

01/04/2002

Method of submission of reports

DISP 1.5.10

A report under this section must be submitted through, and in the electronic format specified in, the FSA Complaints Reporting System or the appropriate section of the FSA website.

01/04/2005

Failure of electronic submission

DISP 1.5.10B

If a firm is unable to submit a report in electronic format because of a systems failure of any kind, the firm must notify the FSA, in writing and without delay, of that systems failure.

01/04/2005

Notification of contact point for complainants

DISP 1.5.11

For the purpose of inclusion in the public record maintained by the FSA, a firm must:

(1) provide the FSA, at the time of its authorisation, with details of a single contact point within the firm for complainants; and

(2) notify the FSA of any subsequent change in those details when convenient and, at the latest, in the firm's next report under DISP 1.5.4 R.

01/10/2002

DISP 1.5.12

The contact point can be by name, job title or department and may include, for example, a helpline telephone number.

01/10/2002

Complete reporting

DISP 1.5.13

A firm must submit reports required under this chapter to the FSA containing all the information required.

01/04/2005

DISP 1.5.14

SUP 15.6 refers to and contains requirements regarding the steps that firms must take to ensure that information provided to the FSA is accurate and complete. Those requirements apply to reports required to be submitted under this chapter.

01/04/2005

DISP 1.6

Cooperation by firms with the Ombudsman

01/12/2004

DISP 1.6.1

A firm must cooperate fully with the Ombudsman in the handling of complaints against it.

01/04/2002

DISP 1.6.2

Cooperation with the Ombudsman includes, but is not limited to, producing requested documents, adhering to any specified time limits, attending hearings when requested to do so and complying promptly with any settlements or awards.

01/04/2002

DISP 1.7

The Society of Lloyd's

01/12/2004

DISP 1.7.1

The Society of Lloyd's must establish and maintain appropriate and effective procedures for handling complaints by policyholders against members of the Society, which comply with DISP 1.

01/04/2002

DISP 1.7.2

Members of the Society of Lloyd's must, in complying with DISP 1, ensure that the arrangements which the member maintains are compatible with the procedures maintained by the Society in accordance with DISP 1.7.1 R, so that, taken as a whole, the requirements of DISP are met.

01/04/2002

DISP 1.7.3

The Society of Lloyd's must take reasonable steps to ensure that complaints by policyholders against members of the Society are dealt with under the procedures in DISP 1.7.1 R and that members comply with the requirements of those procedures.

01/04/2002

DISP 1.7.4

A complaint by a policyholder against a member of the Society of Lloyd's may not be referred to the Financial Ombudsman Service until after the internal procedures in DISP 1.7.1 R have been completed or until after the end of eight weeks from receipt of the complaint, whichever is the earlier.

01/04/2002

DISP 1.7.5

Notices under DISP 1.1.7 R must be given to the FSA by the Society of Lloyd's on behalf of any member eligible for an exemption under that rule.

01/04/2002

DISP 1.7.6

The Society of Lloyd's must notify the FSA if the conditions in DISP 1.1.7 R no longer apply to a member who is exempt.

01/04/2002

DISP 1.7.7

The report in DISP 1.5.4 R must be provided by the Society of Lloyd's and must cover all complaints by policyholders against members falling with the scope of DISP 1.5.4 R.

01/04/2002

DISP 1.7.8

Each member of the Society of Lloyd's is individually subject to the rules in DISP 1 as a result of the insurance market direction given in LLD 6.2.1 D under section 316 of the Act (Direction by Authority).

01/04/2002

DISP 1.7.9

However, the Society of Lloyd's operates a two-tier internal complaints handling procedure, currently set out in the "Code for Underwriting agents: UK Personal Lines Claims and Complaints Handling". Under this procedure, complaints by policyholders against members of the Society are considered by the managing agent and then, if necessary, by the Society of Lloyd's in-house Complaints Department. This procedure (and any procedure that may replace it) will be subject to the requirements in DISP 1.

01/04/2002

DISP 1.7.10

Members will individually comply with DISP 1 if and only if all complaints by policyholders against members are dealt with under the internal procedure established by the Society of Lloyd's for handling those complaints, provided that this procedure complies with DISP. Accordingly, certain of the obligations under DISP 1, for example the obligation to report on complaints received and the obligation to pay fees under DISP 5 , must be complied with by the Society on behalf of members. Managing agents will not have to make a separate report to the FSA on complaints reported under DISP 1.7.7 R.

01/04/2002

DISP 1.7.11

A members' adviser must establish and maintain effective arrangements for handling any complaint from a member of the Society of Lloyd's regarding advice given to the member in connection with the acquiring or disposing of syndicate participation.

01/04/2002

DISP 1.7.12

Complaints from members of the Society of Lloyd's regarding the activities of members' advisers, which cannot be resolved by the members' adviser, cannot be referred to the Financial Ombudsman Service. (See LLD (the Lloyd's sourcebook), for further information concerning complaints by members of the Society of Lloyd's.)

01/04/2002

DISP 1 Annex 1

Complaints return form

01/12/2004

Complaints return form
This annex consists only of one or more forms. Forms are to be found through the following address:

Complaints return form - DISP 1 Annex 1 R

01/04/2005

DISP 2

Jurisdiction of the Financial Ombudsman Service

DISP 2.1

Application and Purpose

01/12/2004

Application

DISP 2.1.1

This chapter applies to the Ombudsman, to firms (except UCITS qualifiers) and to VJ participants.

01/04/2002

DISP 2.1.2

It is also relevant to those who might wish to refer a complaint to the Financial Ombudsman Service.

(2) relevant new complaints about events before commencement but referred to the Financial Ombudsman Service after commencement under the Ombudsman Transitional Order; and

(3) relevant transitional complaints referred to the Financial Ombudsman Service after the relevant commencement date under the Mortgages and General Insurance Complaints Transitional Order.

01/04/2002

DISP 2.1.3

A reference in this chapter to a "complaint":

(1) includes part of a complaint; and

(2) under the Compulsory Jurisdiction includes all or part of a relevant new complaint and all or part of a relevant transitional complaint.

31/10/2004

DISP 2.1.4

References in this chapter to "firms" are to be construed, where relevant, as including:

(1) in accordance with the Ombudsman Transitional Order, unauthorised persons subject to the Compulsory Jurisdiction in relation to relevant complaints; and

(2) as a result of section 226 of the Act, unauthorised persons who were formerly firms in respect of complaints about acts or omissions which occurred at the time when they were authorised, provided that the Compulsory Jurisdiction rules were in force in relation to the activity in question.

01/04/2002

Purpose

DISP 2.1.5

The purpose of this chapter is to set out the rules which govern the scope of both the Compulsory Jurisdiction and the Voluntary Jurisdiction of the Financial Ombudsman Service. They specify who may refer a complaint to the Financial Ombudsman Service and the time limits for doing so. They also set out which activities are covered by the Compulsory Jurisdictionand the Voluntary Jurisdiction and the territorial scope of the Financial Ombudsman Service.

01/04/2002

DISP 2.2

Which complaints can be dealt with under the Financial Ombudsman Service?

01/12/2004

Complaints (other than relevant new complaints or relevant transitional complaints)

DISP 2.2.1

The following conditions will need to be satisfied before a complaint (other than a relevant new complaint or relevant transitional complaint) can be dealt with under the Financial Ombudsman Service:

(1) the complainant must be an eligible complainant (see DISP 2.4);

(2) the firm or VJ participant about which the complaint is made must be one which is subject to either the Compulsory Jurisdiction or the Voluntary Jurisdiction, as appropriate;

(3) the activity to which the complaint relates must be subject to either the Compulsory Jurisdiction or the Voluntary Jurisdiction, as appropriate;

(4) in relation to the Compulsory Jurisdiction, the act or omission complained of must have occurred at a time when the rules in DISP 2 were in force, in relation to the activity being complained about;

(5) the firm or VJ participant must have failed to resolve the complaint to the satisfaction of the complainant within eight weeks of receiving it; and

(6) the firm or VJ participant about which the complaint is made must:

(a) in the case of the Compulsory Jurisdiction, have been authorised under the Act at the time of the act or omission to which the complaint relates; or

(b) in the case of the Voluntary Jurisdiction, have been a VJ participant at the time of the act or omission to which the complaint relates or have agreed to let the Financial Ombudsman Service consider such complaints, and must not have withdrawn from being a VJ participant at the time when the complaint is referred to the Financial Ombudsman Service.

31/10/2004

Relevant new complaints

DISP 2.2.2

(1) Article 3 of the Ombudsman Transitional Order provides that (subject to certain modifications) the Compulsory Jurisdiction applies to a relevant new complaint, provided that:

(a) the act or omission is that of a person who was, immediately before commencement, subject to a former scheme;

(b) the act or omission occurred in the carrying on by that person of an activity to which that former scheme applied; and

(2) For the purposes of (1)(c), the Ombudsman Transitional Order enables the Ombudsman, if he considers it appropriate, to treat the complainant as eligible if he would have been entitled to refer an equivalent complaint to the former scheme in question immediately before commencement.

(3) The Ombudsman Transitional Order enables relevant new complaints to be handled, as far as possible, under the Financial Ombudsman Service procedures, but provides for the rules of the former schemes to apply or be taken into account in certain circumstances.

(4) The Ombudsman Transitional Order makes separate provision for the treatment of relevant existing complaints, as described in DISP App 1

01/04/2002

Relevant transitional complaints

DISP 2.2.2A

(1) Article 2 of the Mortgage and General Insurance Complaints Transitional Order provides that (subject to certain modifications) the Compulsory Jurisdiction applies to a relevant transitional complaint, provided that:

(a) the act or omission is that of a person ("R") who, at the time of that act or omission, was subject to a former scheme;

(b) R was an authorised person on or after the relevant commencement date;

(d) the complainant is eligible and wishes to have the complaint dealt with under the new scheme.

(2) For the purposes of (1)(d), the Mortgage and General Insurance Complaints Transitional Order enables the Ombudsman, if he considers it appropriate, to treat the complainant as eligible if he would have been entitled to refer an equivalent complaint to the former scheme in question immediately before the relevant commencement date.

(3) The Mortgage and General Insurance Transitional Order enables relevant transitional complaints to be handled, so far as possible, under the Financial Ombudsman Service procedures, but provides for the rules of the former schemes to apply or be taken into account in certain circumstances.

31/10/2004

Dismissal of complaints without consideration of the merits

DISP 2.2.3

Under DISP 3.3.1 R, the Ombudsman may dismiss a complaint without considering its merits if he is satisfied that the complainant has not suffered, or is unlikely to suffer, financial loss, material distress or material inconvenience.

01/04/2002

DISP 2.3

Time Limits for referral of complaints to the Financial Ombudsman Service

01/12/2004

DISP 2.3.1

(1) The Ombudsman cannot consider a complaint (except as described in (2)) if the complainant refers it to the Financial Ombudsman Service:

(a) less than eight weeks after receipt of the complaint by the firm or VJ participant, unless the firm or VJ participant has already sent the complainant its final response; or

(b) more than six months after the date on which the firm or VJ participant sends the complainant its final response advising him that he may refer his complaint to the Financial Ombudsman Service; or

(c) more than six years after the event complained of or (if later) more than three years from the date on which he became aware (or ought reasonably to have become aware) that he had cause for complaint, unless he has referred the complaint to the firm or VJ participant or to the Ombudsman within that period and has a written acknowledgement or some other record of the complaint having been received (but see DISP 2.3.5 G - DISP 2.3.6 R).

(2) The Ombudsman can consider complaints outside the time limits in (1)(b) or (c) or in DISP 2.3.6 R when, in his view, the failure to comply with the time limits was as a result of exceptional circumstances or where he is required to do so by the Ombudsman Transitional Order (see DISP 2.3.2 G) or where the firm or VJ participant has not objected to the Ombudsman considering the complaint.

31/10/2004

DISP 2.3.1A

If the complaint relates to the sale of an endowment policy for the purpose of achieving capital repayment of a mortgage, the receipt by the complainant of a letter which states that there is a risk (rather than a high risk) that the policy would not, at maturity, produce a sum large enough to repay the target amount is not, itself, sufficient to cause the three year time period in DISP 2.3.1 R (1)(c) to start to run.

01/02/2003

DISP 2.3.2

In relation to DISP 2.3.1 R (1)(b) and (c), article 4(2) of the Ombudsman Transitional Order requires an Ombudsman to extend the time limit in respect of a relevant new complaint referred to the Financial Ombudsman Service not later than twelve months after commencement, so the time limit applying to the complaint is the same as that which would have applied under the former scheme in question as it had effect immediately before commencement.

01/04/2002

DISP 2.3.3

For the purposes of DISP 2.3.1 R (2), an example of an exceptional circumstance might be where the complainant has been or is incapacitated or where the firm or VJ participant has failed, in its final response, to inform the complainant that he may refer his complaint to the Financial Ombudsman Service or that he must do so within six months.

01/04/2002

DISP 2.3.4

Under DISP 5.6.1 R a firm or VJ participant is liable to pay a case fee in respect of chargeable cases. However, in some circumstances, the Ombudsman may conclude that a firm or VJ participant should have more time to resolve a complaint before a case fee is incurred (for example, where there has been delay in obtaining information from third parties or where the Ombudsman considers that the complainant has not fully cooperated with the firm or VJ participant in the investigation of the complaint).

01/04/2002

Exceptions for reviews of past business

DISP 2.3.5

DISP 2.3.1 R (1)(c) does not apply where:

(1) the time limit has been extended under a scheme for review of past business approved by the Treasury under section 404 of the Act (Schemes for reviewing past business); or

(2) the complaint concerns a contract or policy which is the subject of a review directly or indirectly under:

(a) the terms of the Statement of Policy on 'Pension transfers and Opt-outs' issued by the FSA on 25 October 1994; or

(b) the terms of the policy statement for the review of specific categories of FSAVC business issued by the FSA on 28 February 2000.

01/04/2002

Exceptions for certain mortgage endowment complaints

DISP 2.3.6

(1) If a complaint relates to the sale of an endowment policy for the purpose of achieving capital repayment of a mortgage and the complainant receives a letter from a firm or a VJ participant warning that there is a high risk that the policy will not, at maturity, produce a sum large enough to repay the target amount then, subject to (2), (3), (4) and (5):

(a) time for referring a complaint to the Financial Ombudsman Service starts to run from the date the complainant receives the letter; and

(b) ends three years from that date ("the final date").

(2) Paragraph (1)(b) applies only if the complainant also receives within the three year period mentioned in (1)(b) and at least six months before the final date an explanation that the complainant's time to refer such a complaint would expire at the final date.

(3) If an explanation is given but is sent outside the period referred to in (2), time for referring a complaint will run until a date specified in such an explanation which must not be less than six months after the date on which the notice is sent.

(4) A complainant will be taken to have complied with the time limits in (1) to (3) above if in any case he refers the complaint to the firm or VJ participant within those limits and has a written acknowledgement or some other record of the complaint having been received.

(5) Paragraph (1) does not apply if the Ombudsman is of the opinion that, in the circumstances of the case, it is appropriate for DISP 2.3.1 R(1)(c) to apply.

01/06/2004

DISP 2.4

Who can refer a complaint to the Financial Ombudsman Service?

01/12/2004

DISP 2.4.1

A complaint may be dealt with under the Financial Ombudsman Service only if it is brought by or on behalf of an eligible complainant.

01/04/2002

DISP 2.4.2

Eligible complainants are those falling within one of the classes of person specified in DISP 2.4.3 R; and

(1) having a customer or potential customer relationship with a firm or VJ participant (as specified in DISP 2.4.7 R and DISP 2.4.8 R); or

(2) having an indirect relationship with a firm or VJ participant (as specified in DISP 2.4.10 R);

or, in relation to relevant complaints, those specified in the Ombudsman Transitional Order or the Mortgages and General Insurance Transitional Order (see DISP 2.4.14 G, DISP 2.4.15 G, and DISP App 1.3.1 G).

31/10/2004

Classes of person

DISP 2.4.3

(1) Subject to (2), a person is an eligible complainant if he is:

(a) a private individual; or

(b) a business, which has a group annual turnover of less than £1 million at the time the complainant refers the complaint to the firm

(c) a charity which has an annual income of less than £1 million at the time the complainant refers the complaint to the firm or VJ participant; or

(d) a trustee of a trust which has a net asset value of less than £1 million at the time the complainant refers the complaint to the firm or VJ participant;

who satisfies the relevant criteria in DISP 2.4.7 R - DISP 2.4.12 R, and is not within (2).

(2) The following are not eligible complainants:

(a) an individual, business, charity or trustee, who was an intermediate customer or market counterparty in relation to the firm in question at the time of the act or omission, and in respect of the activity, which is the subject of the complaint;

(b) a firm or VJ participant whose complaint relates in any way to an activity which the firm itself has permission to carry on or which the VJ participant itself conducts, and which is subject to the Compulsory Jurisdiction or the Voluntary Jurisdiction of the Financial Ombudsman Service.

01/04/2002

DISP 2.4.4

For the purposes of DISP 2, a business includes a sole trader, a company, an unincorporated body and a partnership carrying on any trade or profession.

01/04/2002

DISP 2.4.5

If a firm or VJ participant is in any doubt about the eligibility of a business, charity or trust, it should treat the complainant as if it were eligible. If the complaint is referred to the Financial Ombudsman Service, the Ombudsman will determine eligibility by reference to appropriate evidence, such as audited accounts or VAT returns.

01/04/2002

DISP 2.4.6

For the purposes of DISP 2.4.3 R(1)(b), a subsidiary of a corporate group (as defined in section 262(1) of the Companies Act 1985) will be eligible only where the corporate group as a whole meets the turnover test.

01/04/2002

Eligible complainants: customers

DISP 2.4.7

A person is an eligible complainant if:

(1) he is or has been a customer of a firm

(2) the complaint arises out of matters relevant to his being or having been a customer of the firm or VJ participant; and

(3) he falls into one of the classes of person in DISP 2.4.3 R(1).

01/04/2002

Eligible complainants: potential customers

DISP 2.4.8

A person is an eligible complainant if:

(1) the complaint arises out of a firm's or VJ participant's actions or failure to act for the complainant in his capacity as a potential customer of the firm or VJ participant; and

(2) he falls into one of the classes of person in DISP 2.4.3 R(1).

01/04/2002

DISP 2.4.9

DISP 2.4.8 R is intended to enable a potential customer to use the Financial Ombudsman Service where the complaint involves an allegation that he has suffered or may suffer financial loss, material distress or material inconvenience as a result of a firm's or VJ participant's wrongful act or omission (for example, where, as a result of maladministration or illegal discrimination, a service has not been provided). A complaint about the legitimate exercise of a firm's or VJ participant's commercial judgment may be dismissed by an Ombudsman without consideration of its merits under DISP 3.3.1 R(11).

01/04/2002

Eligible complainants: indirect complaints

DISP 2.4.10

A person is an eligible complainant if:

(1) he is not, and has not been, a customer or potential customer of the firm or VJ participant in relation to the subject matter of the complaint; and

(2) he has a complaint against the firm or VJ participant which either:

(a) arises out of a relationship which he has with the firm or VJ participant as described in DISP 2.4.11 R or DISP 2.4.12 R (4); or

(b) is derived from another person and which arises from any of the circumstances described in DISP 2.4.12 R; and

(3) he falls into one of the classes of persons in DISP 2.4.3 R(1).

01/09/2003

DISP 2.4.11

The relationships with the firm or VJ participant relevant for DISP 2.4.10 R(2)(a) are:

(1) the complainant has given the firm or VJ participant a guarantee or security for a mortgage or loan; or

(2) the complainant has relied in the course of his business on a cheque guarantee card issued by the firm or VJ participant; or

(3) the complainant is the true owner or the person entitled to immediate possession of a cheque or other bill of exchange, or of the funds it represents, collected by the firm or VJ participant for someone elses account; or

(4) the complainant is the recipient of a banker's reference given by the firm or VJ participant; or

(5) the complainant is the holder of units in a collective investment scheme and the firm or VJ participant is the operator or depositary of the scheme.

01/09/2003

DISP 2.4.12

The circumstances relevant for DISP 2.4.10 R(2)(b) are:

(1) that the complainant is a beneficiary under a trust or estate of which the firm or VJ participant is trustee or personal representative; or

(2) that the complainant is a person for whose benefit a contract of insurance was taken out or was intended to be taken out; or

(3) that the complainant is a person on whom the legal right to benefit from a claim under a contract of insurance has been devolved by contract, statute or subrogation or;

(4) that the complainant is the beneficial owner of units in a collective investment scheme, and the firm or the VJ participant is the operator or depositary of the scheme.

01/09/2003

DISP 2.4.12A

In respect of a complaint under the Voluntary Jurisdiction relating to National Savings and Investments' business under DISP 2.6.9 R (9), where the complainant is not otherwise eligible in accordance with DISP 2.4, the Ombudsman may, nonetheless, if he considers it appropriate, treat the complainant as an eligible complainant, if he or she should have been entitled to refer an equivalent complainant to the Adjudicator for National Savings or, as the case may be, the Parliamentary Commissioner for Administration immediately before the Voluntary Jurisdiction began to cover National Savings and Investments' business, provided that the complainant wishes to have the complaint dealt with under the Financial Ombudsman Service.

01/12/2004

DISP 2.4.13

DISP 2.4.12 R(2) and(3) include, for example, employees covered by a group permanent health policy taken out by an employer, which provides in the insurance contract that the policy was taken out for the benefit of the employee. They do not include, for example, complaints about the actions of the insurer of the other driver in a car accident,

01/09/2003

DISP 2.4.14

In respect of a relevant new complaint or a relevant transitional complaint, where the complainant is not eligible in accordance with DISP 2.4, article 3(3) of the Ombudsman Transitional Order and article 2(3) of the Mortgages and General Insurance Complaints Transitional Order provides that the Ombudsman may, nonetheless, if he considers it appropriate, treat the complainant as an eligible complainant if he or she would have been entitled to refer an equivalent complaint to the former scheme in question immediately before commencement, provided that the complainant wishes to have the complaint dealt with under the new scheme.

31/10/2004

DISP 2.4.15

Article 3(4) of the Ombudsman Transitional Order provides that, in the case of a relevant new complaint, where the former scheme in question is the Insurance Ombudsman Scheme, a complainant is not to be treated as an eligible complainant unless:

(1) he is an individual; and

(2) the complaint does not concern aspects of a policy relating to a business or trade carried on by him.

01/04/2002

DISP 2.4.15A

Article 2(4) of the Mortgages and General Insurance Transitional Order provides that, in the case of a relevant transitional complaint, where the former scheme in question is the GISC facility, a complainant is not to be treated as an eligible complainant unless:

(1) he is an individual; and

(2) he is acting otherwise than solely for the purposes of his business.

31/10/2004

DISP 2.4.15B

Article 2(5) of the Mortgages and General Insurance Transitional Order provides that, in the case of a relevant transitional complaint, where the former scheme in question is the MCAS scheme, a complainant is not to be treated as an eligible complainant if:

(1) the complaint does not relate to a breach of the Mortgage Code published by the Council of Mortgage Lenders;

(2) the complaint concerns physical injury, illness, nervous shock or their consequences; or

(3) the complainant is claiming a sum of money that exceeds £100,000.

31/10/2004

Representatives of eligible complainants

DISP 2.4.16

A complaint may be brought on behalf of an eligible complainant, or a deceased person who would have been an eligible complainant, by a person authorised by the eligible complainant or authorised by law.

01/04/2002

DISP 2.4.17

It is immaterial whether the person authorised to act on behalf of an eligible complainant under DISP 2.4.16 R:

(1) can satisfy any of the criteria applicable to the person under DISP 2.4.3 R(1); or

(2) has a claim of his own, or is acting for another person against the firm or VJ participant; or

(3) is or was a customer or potential customer of the firm or VJ participant.

01/04/2002

DISP 2.5

Which firms are subject to the jurisdiction of the Financial Ombudsman Service?

01/12/2004

DISP 2.5.1

All firms are subject to the Compulsory Jurisdiction of the Financial Ombudsman Service. VJ participants are subject to the Voluntary Jurisdiction and to DISP 2 to the extent specified in the standard terms (DISP 4).

01/04/2002

DISP 2.5.2

Firms may, however, be exempt from the requirements of DISP 1 (Complaint handling procedures for firms) and DISP 5 (Financial Ombudsman Service funding rules), if they qualify under DISP 1.1.7 RR (Exemption).

01/04/2002

DISP 2.5.3

Members of the Society of Lloyd's are treated as firms for the purposes of the Compulsory Jurisdiction (including the rules in DISP 1 relating to firms' complaints procedures) and are subject to DISP 1 as a result of the insurance market direction given in LLD 6.2.1 D, under section 316 of the Act (Direction by Authority). However, as set out in DISP 1.7, members will individually comply with DISP 1 if and only if all complaints by policyholders against members are dealt with under the internal procedures established by the Society of Lloyd's for handling those complaints, provided that these procedures themselves comply with DISP 1. Accordingly, certain of the obligations under DISP 1, for example, the obligation to report on complaints received, must be complied with by the Society on behalf of members.

01/04/2002

DISP 2.6

To which activities do the rules apply?

01/12/2004

The Compulsory Jurisdiction

DISP 2.6.1

The Ombudsman can consider a complaint under the Compulsory Jurisdiction only if it relates to an act or omission by a firm in the carrying on of one or more of the following activities (unless the provision described in DISP 2.6.3 R applies):

(1) regulated activities;

(2) lending money secured by a charge on land;

(3) lending money (other than restricted credit);

(4) paying money by a plastic card (other than a store card);

(5) the provision of ancillary banking services (see DISP 2.6.6 G);

or activities ancillary to them (see DISP 2.6.2 G).

01/04/2002

DISP 2.6.2

The activities in DISP 2.6.1 R include any ancillary activities, including advice, provided by the firm in connection with those activities.

01/04/2002

DISP 2.6.3

Under article 3 of the Ombudsman Transitional Order, the Ombudsman can also consider a relevant new complaint under the Compulsory Jurisdiction where it relates to an act or omission of a firm which was, immediately before commencement, subject to a former scheme, provided that:

(1) the act or omission occurred in the carrying on by that firm of an activity to which that former scheme applied; and

(2) the complainant is eligible and wishes to have the complaint dealt with under the new scheme.

01/04/2002

DISP 2.6.3A

Under article 2 of the Mortgage and General Insurance Complaints Transitional Order, the Ombudsman can also consider a relevant transitional complaint under the Compulsory Jurisdiction where it relates to an act or omission of a firm which was, immediately before the relevant commencement date, subject to a former scheme, provided that:

(1) the act or omission occurred in the carrying on by that firm of an activity to which that former scheme applied; and

(2) the complainant is eligible and wishes to have the complaint dealt with under the new scheme.

31/10/2004

DISP 2.6.4

The carrying on of an activity in DISP 2.6.1 R includes offering, providing or failing to provide and administering or failing to administer a service in relation to the activities covered by that rule. This includes the manner in which a firm has administered its business, provided that the business is an activity subject to the jurisdiction of the Financial Ombudsman Service.

01/04/2002

DISP 2.6.5

Complaints about acts or omissions by a firm include complaints about acts or omissions in respect of activities for which the firm is responsible (including business of any appointed representative for which the firm has accepted responsibility).

30/06/2004

DISP 2.6.6

For the purposes of DISP 2.6.1 R (5), ancillary banking services include, for example, the provision and operation of cash machines and safe deposit boxes and the provision of account aggregation services (that is, services where details from several accounts which may be held by different financial service providers can be accessed by a single password).

01/09/2003

DISP 2.6.7

A complaint about an authorised professional firm cannot be handled under the Compulsory Jurisdiction of the Financial Ombudsman Service if it relates solely to a non-mainstream regulated activity and can be handled by a designated professional body.

01/04/2002

DISP 2.6.8

A complaint about a non-mainstream regulated activity conducted by an authorised professional firm will be handled by the relevant professional body.

01/04/2002

The Voluntary Jurisdiction

DISP 2.6.9

The Ombudsman can consider a complaint under the Voluntary Jurisdiction only if it is not covered by the Compulsory Jurisdictionand it relates to an act or omission in the carrying on of one or more of the following activities by a VJ participant:

(1) general insurance business;

(2) accepting deposits;

(3) lending money secured by a charge over land;

(4) lending money (other than restricted credit);

(5) paying money by a plastic card (other than a store card);

(6) the provision of ancillary banking services;

(6A) acting as an intermediary for a loan secured by a charge over land;

(6B) acting as an intermediary for general insurance business or long-term insurance business;

(7) a financial services activity carried on after commencement and which had been covered by a former scheme in so far as the VJ participant was a member of that former scheme, in respect of that activity, immediately before the commencement day;

(8) an activity carried on on or after 29 April 1988 which was a regulated activity when the VJ participant joined the Voluntary Jurisdiction(or became an authorised person if later) but which was not a regulated activity at the time of the act or omission;

(9) National Savings and Investments' business;

or activities ancillary to them (see DISP 2.6.11 R).

01/04/2002

DISP 2.6.9A

A complaint may be covered by the Voluntary Jurisdiction under one or more of the subparagraphs of DISP 2.6.9 R

01/12/2004

Acting as an intermediary for a loan secured by a charge over land

DISP 2.6.9B

DISP 2.6.9 R (6A)includes:

(1) making arrangements for a borrower or potential borrower to enter into, or vary the terms of, a loan secured by a charge over land;

(2) making arrangements with a view to a borrower or potential borrower who participates in the arrangements entering into a loan secured over land; and

(3) advising a borrower or potential borrower on the merits of entering into, or varying the terms of, a loan secured by a charge over land.

01/12/2004

Acting as an intermediary for general insurance business or long-term insurance business

DISP 2.6.9C

DISP 2.6.9 R (6B)includes:

(1) introducing, proposing or carrying out other work preparatory to the conclusion of contracts of general insurance business or long-term insurance business or reinsurance;

(2) concluding such contracts;

(3) assisting in the administration and performance of such contracts, in particular in the event of a claim;

(4) dealing as an agent, or arranging deals, in such contracts (or rights in them);

(5) managing, safeguarding or administering assets consisting of, or including, such contracts (or rights in them); and

(6) advising on the merits of buying, selling, subscribing for or underwriting such contracts (or rights in them).

But customers of reinsurance intermediaries are unlikely to be eligible complainants.

01/04/2002

DISP 2.6.10

DISP 2.6.9 R (7) enables complaints about VJ participants which, immediately before the commencement day, were members of one of the former schemes replaced by the Financial Ombudsman Service to be dealt with under the Voluntary Jurisdiction. This is in respect of the financial services activities for which the VJ participant was previously covered but excludes complaints which fall into the Compulsory Jurisdiction as relevant complaints. So the complaints which are covered by DISP 2.6.9 R (7) are only those which arise out of acts or omissions occurring after the commencement day.

01/04/2002

DISP 2.6.10A

DISP 2.6.9 R (6) includes the activities referred to in DISP 2.6.6 G.

01/12/2004

DISP 2.6.10B

DISP 2.6.9 R (8)enables a firm that is subject to the compulsory jurisdiction for regulated activities to become a VJ participant in order to cover complaints about earlier events relating to those activities before they became regulated activities.

01/12/2004

DISP 2.6.11

The activities in DISP 2.6.9 R include any ancillary activities, including advice and any ancillary long-term insurance, provided by the VJ participant in connection with those activities.

01/04/2002

DISP 2.6.12

A complaint subject to these rules which is not covered by the Compulsory Jurisdiction can be considered by the Ombudsman even though it relates to an act or omission that occurred before the VJ participant was participating in the Financial Ombudsman Service, and whether the act or omission occurred before or after the commencement day, either:

(1) if the complaint could have been dealt with under a former scheme; or

(2) as a consequence of the agreement of the VJ participant in DISP 4.2.5 R.

01/04/2002

DISP 2.6.13

The provisions of DISP 2.6.12 R are made under the power in sections 227(13) and 227(14) of the Act. Those sections allow for a complaint relating to an act or omission occurring either before commencement or before the VJ participant joined the Voluntary Jurisdiction (or both) to be dealt with under the Financial Ombudsman Service. Under section 227(13), the act or omission must be one which could have been dealt with under a former scheme. Under section 227(14), the VJ participant must agree; but that agreement is provided by DISP 2.6.12 R (2)and DISP 4.2.5 R. Where complaints in this category are not already covered by the Compulsory Jurisdiction as relevant complaints, they can, therefore, be included in the Voluntary Jurisdiction under DISP 2.6.12 R.

01/04/2002

DISP 2.7

The territorial scope of the jurisdiction of the Financial Ombudsman Service

01/12/2004

DISP 2.7.1

The territorial scope of the jurisdiction of the Financial Ombudsman Service covers complaints about the activities of a firm, an appointed representative or a VJ participant carried on from an establishment in the United Kingdom.

01/04/2002

DISP 2.7.2

The territorial scope of the jurisdiction of the Voluntary Jurisdiction of the Financial Ombudsman Service also covers complaints about activities specified in DISP 2.6.9 R (1) to DISP 2.6.9 R (6) or activities ancillary to them carried on from an establishment elsewhere in the EEA if the following conditions are met:

(1) the activity is directed wholly or partly at the United Kingdom (or part of it);

(2) contracts governing the activity are, or (in the case of a potential customer) would have been, made under the law of England and Wales, Scotland or Northern Ireland; and

(3) the VJ participant has notified appropriate regulators in its Home State of its intention to participate in the Voluntary Jurisdiction.

01/04/2002

DISP 2.7.3

DISP 2.7.2 R (1) covers activities which the VJ participant conducts with the intention that some or all of the customers relating to that activity should reside in the United Kingdom.

01/04/2002

DISP 2.7.4

The Compulsory Jurisdiction:

(1) covers firms (including appointed representatives) operating from an establishment in the United Kingdom, including incoming EEA firms and incoming Treaty firms which qualify for authorisation under Schedule 3 (EEA Passport Rights) or Schedule 4 (Treaty Rights) to the Act; but

(2) does not cover complaints which concern business conducted by branches of firms outside the United Kingdom or by EEA firms operating in the United Kingdom on a services basis from outside the United Kingdom.

01/04/2002

DISP 2.7.5

The Voluntary Jurisdiction:

(1) covers VJ participants operating from an establishment in the United Kingdom;

(2) also covers complaints that concern business conducted by VJ participants operating elsewhere in the EEA, but only in relation to the activities specified in DISP 2.6.9 R (1) to DISP 2.6.9 R (6) subject to the conditions in DISP 2.7.2 R (1) to DISP 2.7.2 R (3).

01/12/2004

DISP 2.7.6

A complaint can be dealt with under the Financial Ombudsman Service irrespective of whether the complainant lives or is based in the United Kingdom.

01/12/2004

DISP 3

Complaint handling procedures of the Financial Ombudsman Service

DISP 3.1

Application and Purpose

01/12/2004

Application

DISP 3.1.1

This chapter applies to the Ombudsman and to firms.

01/04/2002

DISP 3.1.2

It is also relevant to those who might wish to refer a complaint to the Financial Ombudsman Service.

01/04/2002

DISP 3.1.3

VJ participants are subject to the rules in this chapter by contract under the standard terms (see DISP 4).

01/04/2002

DISP 3.1.4

Except as otherwise specified, references in this chapter to a "complaint" include:

(1) a relevant new complaint and a relevant transitional complaint; and

(2) part of a complaint or a relevant new complaint or a relevant transitional complaint.

31/10/2004

DISP 3.1.5

References in this chapter to "firms" are to be construed, where relevant, as including:

(1) in accordance with the Ombudsman Transitional Order, unauthorised persons subject to the Compulsory Jurisdiction in relation to relevant complaints; and

(2) as a result of section 226 of the Act, unauthorised persons who were formerly firms in respect of complaints about acts or omissions which occurred at the time when they were firms, provided that the Compulsory Jurisdiction rules were in force in relation to the activity in question.

01/04/2002

DISP 3.1.6

The Ombudsman Transitional Order and the Mortgage and General Insurance Complaints Transitional Order provide, with some exceptions (see DISP 2.2.2 G and DISP 2.2.2A G (scope of Compulsory Jurisdiction and Relevant transitional complaints), DISP 2.2.3 G (time limits), DISP 2.4.14 G and DISP 2.4.15 G (eligible complainant) and DISP 3.8.2 G and DISP 3.8.2A G DISP 3.8 (determinations), for relevant new complaints and relevant transitional complaints to be determined in accordance with the requirements of the Financial Ombudsman Service.

31/10/2004

Purpose

DISP 3.1.7

The purpose of this chapter is to set out the way in which the Financial Ombudsman Service and, in particular, the Ombudsman, will operate to ensure that complaints may be resolved quickly and with minimum formality. It sets out the procedures for the investigation and consideration of complaints, including the circumstances in which a complaint may be terminated without consideration of its merits; the evidence which may be required or admitted; the provisions for fixing and extending time limits for different aspects of the proceedings; the factors which the Ombudsman will take into account in determining what is fair and reasonable; the types of loss or damage for which the Ombudsman can award compensation; the limits on awards and the costs that can be awarded.

01/04/2002

DISP 3.2

The investigation and consideration of complaints by the Ombudsman

01/12/2004

DISP 3.2.1

On receipt of a complaint (and subsequently if necessary) the Ombudsman must have regard to the following matters:

(1) whether or not the complaint meets the criteria in DISP 2.2 (Which complaints can be dealt with under the Financial Ombudsman Service?);

(2) whether or not the complaint is within the time limits in DISP 2.3 (Time limits for referral of complaints to the Financial Ombudsman Service);

(3) whether or not the complainant is an eligible complainant; and

(4) whether or not the complaint is one which should be dismissed without consideration of its merits under DISP 3.3(Dismissal of complaints without consideration of the merits).

01/04/2002

DISP 3.2.2

In the case of relevant new complaints, the Ombudsman will take account of the relevant criteria under the Ombudsman Transitional Order, referred to in DISP 2.2.2 G, and will extend the time limits in DISP 2.3, as required under article 4(2) of the Ombudsman Transitional Order and described in DISP 2.3.2 G.

01/04/2002

DISP 3.2.3

Where the firm has not had the eight weeks provided for under DISP 1.4.5 R to consider the complaint, the Ombudsman will refer the complaintto the firm, unless the firm has already issued a final response.

01/04/2002

DISP 3.2.4

Where a firm fails to send a complainant a final response by the end of eight weeks, the Ombudsman may consider the complaint.

01/04/2002

DISP 3.2.5

Where the Ombudsman considers that the complaint or the complainant may be ineligible under the jurisdiction rules (see DISP 2 (Jurisdiction of the Financial Ombudsman Service)) he must give the complainant an opportunity to make representations before he reaches his decision and he must give reasons to the complainant for that decision and inform the firmof his decision.

01/04/2002

DISP 3.2.6

DISP 3.2.5 R applies without prejudice to a firm's right to raise the issue of eligibility subsequently.

01/04/2002

DISP 3.2.7

Where the firmdisputes the eligibility of the complaint or the complainant, the Ombudsman must give the parties an opportunity to make representations before he reaches his decision and he must give reasons to the parties for that decision.

01/04/2002

DISP 3.2.8

Where the Ombudsman considers that the complaint may be one which should be dismissed without consideration of its merits, under DISP 3.3 (Dismissal of complaints without consideration of the merits), he must give the complainant an opportunity to make representations before he makes his decision. If he then decides that the complaint should be dismissed, he must give reasons to the complainant for that decision and inform the firm of that decision.

01/04/2002

DISP 3.2.9

Where the Ombudsman considers that both the complaint and the complainant are eligible and that there is a reasonable prospect of resolving the complaint by mediation, he may attempt to negotiate a settlement between the parties.

01/04/2002

DISP 3.2.10

The Ombudsman will attempt to resolve complaints at the earliest possible stage and by whatever means appear to him to be most appropriate, including mediation or investigation.

01/04/2002

DISP 3.2.11

If the Ombudsman decides that an investigation is necessary, he will:

(1) during the investigation, give both parties an opportunity of making representations;

(2) send to the parties a provisional assessment, setting out his reasons and a time limit within which either party must respond; and

(3) if either party indicates disagreement with the provisional assessment within the time limit prescribed in DISP 3.2.11 R (2), proceed to determination (see DISP 3.8 (Determination by the Ombudsman)).

01/04/2002

DISP 3.2.12

The parties will be informed of their right to make representations before the Ombudsman makes a determination. If he considers that the complaint can be fairly determined without convening a hearing, he will determine the complaint. If not, he will invite the parties to attend a hearing. No hearing will be held after the Ombudsman has determined the complaint.

01/04/2002

DISP 3.2.13

A party who wishes to request a hearing must do so in writing, setting out the issues he wishes to raise and (if appropriate) any reasons why he considers the hearing should be in private, so that the Ombudsman may consider whether the issues are material, whether a hearing should take place and, if so, whether it should be held in public or private.

01/04/2002

DISP 3.2.14

In deciding if there should be a hearing and, if so, whether it should be in public or private, the Ombudsman will have regard to the provisions of the European Convention on Human Rights.

01/04/2002

DISP 3.3

Dismissal of complaints without consideration of the merits

01/12/2004

DISP 3.3.1

The Ombudsman may dismiss a complaint without considering its merits if he:

(1) is satisfied that the complainant has not suffered, or is unlikely to suffer, financial loss, material distress or material inconvenience; or

(2) considers the complaint to be frivolous or vexatious; or

(3) considers that the complaint clearly does not have any reasonable prospect of success; or

(4) is satisfied that the firmhas already made an offer of compensation which is fair and reasonable in relation to the circumstances alleged by the complainant and which is still open for acceptance; or

(5) is satisfied that the complaint relates to a transaction which the firmin question has reviewed in accordance with the regulatory standards for the review of such transactions prevailing at the time of the review, or in accordance with the terms of a scheme order under section 404 of the Act (Schemes for reviewing past business), including, if appropriate, making an offer of redress to the complainant, unless he is of the opinion that the standards or terms of the scheme order did not address the particular circumstances of the case; or

(6) is satisfied that the matter has previously been considered or excluded under the Financial Ombudsman Service, or a former scheme (unless material new evidence likely to affect the outcome has subsequently become available); or

(7) is satisfied that the matter has been dealt with, or is being dealt with, by a comparable independent complaints scheme or dispute resolution process; or

(8) is satisfied that the subject matter of the complaint has been the subject of court proceedings where there has been a decision on the merits; or

(9) is satisfied that the subject matter of the complaint is the subject of current court proceedings unless proceedings are stayed or sisted (by agreement of all parties or order of the court) in order that the matter may be considered under the Financial Ombudsman Service; or

(10) considers that it would be more suitable for the matter to be dealt with by a court, arbitration or another complaints scheme; or

(11) is satisfied that it is a complaint about the legitimate exercise of a firm's commercial judgment; or

(12) is satisfied that it is a complaint about employment matters from an employee or employees of a firm; or

(13) is satisfied that it is a complaint about investment performance; or

(14) is satisfied that it is a complaint about a firm'sdecision when exercising a discretion under a will or private trust; or

(15) is satisfied that it is a complaint about a firm'sfailure to consult beneficiaries before exercising a discretion under a will or private trust, where there is no legal obligation to consult; or

(16) is satisfied that a complaint which involves or might involve more than one eligible complainant has been referred without the consent of the other complainant or complainants and the Ombudsman considers that it would be inappropriate to deal with the complaint without that consent; or

(17) is satisfied that there are other compelling reasons why it is inappropriate for the complaint to be dealt with under the Financial Ombudsman Service.

01/04/2002

DISP 3.3.2

Under article 5(2)(c) of the Ombudsman Transitional Order, the Ombudsman, in deciding whether a relevant complaint is to be dismissed without consideration of its merits, is to take into account whether an equivalent complaint would have been so dismissed under the former scheme in question, as it had effect immediately before commencement.

01/04/2002

DISP 3.3.2A

Under article 4(2) of the Mortgage and General Insurance Complaints Transitional Order, the Ombudsman, in deciding whether a relevant transitional complaint is to be dismissed without consideration of its merits, must take into account whether an equivalent complaint would have been so dismissed under the former scheme in question, as it had effect immediately before the relevant commencement date.

31/10/2004

DISP 3.3.3

For the purposes of DISP 3.3.1 R (4), offers of compensation include ex gratia payments.

01/04/2002

DISP 3.3.4

In DISP 3.3.1 R (5) the transaction could, for example, be a pension transaction which has been reviewed by the firm in accordance with the relevant regulatory standards. The Ombudsman may decide not to proceed with a complaint about the result of that review unless he considers that the standards or guidance published by the regulator did not address the particular circumstances of the case.

01/04/2002

DISP 3.3.5

When deciding if it would be suitable for a complaint to be dealt with outside the Financial Ombudsman Service (DISP 3.3.1 R (10)), the Ombudsman may consider whether, in view of a conflict of evidence, a fair resolution of the complaint could be achieved only through examination of the evidence by the courts.

01/04/2002

DISP 3.3.6

The Ombudsman may decide to proceed with a complaint which would otherwise be dismissed under DISP 3.3.1 R (13), DISP 3.3.1 R (14) or DISP 3.3.1 R (15) if he considers that the complaint involves an allegation of negligence or maladministration.

01/04/2002

DISP 3.4

Referral of a complaint to another complaints scheme for determination

01/12/2004

DISP 3.4.1

The Ombudsman may refer a complaint to another complaints scheme where he considers that it would be more suitable for the matter to be determined by that scheme and the complainant consents to the referral.

01/04/2002

DISP 3.5

Evidence

01/12/2004

DISP 3.5.1

The Ombudsman may, in relation to the evidence which may be required or admitted when he considers and determines a complaint, give directions as to:

(1) the issues on which evidence is required;

(2) the extent to which the evidence required to decide those issues should be oral or written; and

(3) the way in which the evidence should be presented to the Ombudsman.

01/04/2002

DISP 3.5.2

The Ombudsman may:

(1) exclude evidence that would otherwise be admissible in a court of law or include evidence that would not be admissible in such a court;

(2) where he considers it necessary or appropriate, accept information in confidence, so that only an edited version or (where this is not practicable) a summary or description is disclosed to the other party;

(3) reach a decision on the basis of what has been supplied and take account of the failure by a complainant or a firm to provide information that an Ombudsman has requested; and

(4) dismiss a complaint if a complainant fails to supply required information.

01/04/2002

DISP 3.5.3

The provisions in DISP 3.5.2 R (1) follow the provisions of the Civil Justice Rules.

01/04/2002

DISP 3.5.4

For the purposes of DISP 3.5.2 R (2), evidence which the Ombudsman may accept in confidence includes confidential evidence about third parties and security information.

01/04/2002

DISP 3.5.5

The Ombudsman may request a party to a complaint to provide evidence necessary for the determination of the complaint under section 231 of the Act. A failure to comply with the request can be dealt with by the court under section 232.

01/04/2002

DISP 3.6

Time limits

01/12/2004

DISP 3.6.1

The Ombudsman may fix time limits and extend fixed time limits for any aspect of the consideration of a complaint by the Financial Ombudsman Service.

01/04/2002

DISP 3.6.2

If a firm fails to comply with a time limit, the Ombudsman may proceed to the next stage of consideration of the complaint and may, if appropriate, make provision for any material distress or material inconvenience caused by that failure in any award which he decides to make.

01/04/2002

DISP 3.6.3

If a complainant fails to comply with a time limit, the Ombudsman may either proceed to the next stage or dismiss the complaint.

01/04/2002

DISP 3.7

Delegation of the Ombudsman's powers

01/12/2004

DISP 3.7.1

(1) Only an Ombudsman may determine a complaint or decide the circumstances in which information may be disclosed under DISP 3.10.1 R (3).
(2) The Ombudsman may designate members of the staff of FOS Ltd to exercise any of the other powers of the Ombudsman relating to the reference, investigation or consideration of a complaint.
(3) Where any person is so designated, DISP 2 - DISP 4 apply as if any reference to "the Ombudsman" included a reference to that person.

01/04/2002

DISP 3.7.2

The Chief Ombudsman will designate those members of staff of FOS Ltd who are to have these powers.

01/04/2002

DISP 3.8

Determination by the Ombudsman

01/12/2004

Opinion as to fairness and reasonableness

DISP 3.8.1

(1) The Ombudsman will determine a complaint by reference to what is, in his opinion, fair and reasonable in all the circumstances of the case.

(2) In considering what is fair and reasonable in all the circumstances of the case, the Ombudsman will take into account the relevant law, regulations, regulators' rules and guidance and standards, relevant codes of practice and, where appropriate, what he considers to have been good industry practice at the relevant time.

01/04/2002

DISP 3.8.2

In determining, in relation to a relevant new complaint, what is fair and reasonable in all the circumstances of the case and what amount (if any) constitutes fair compensation, for the purposes of section 229(2)(a) of the Act (money awards), the Ombudsman is required, under article 7(2) of the Ombudsman Transitional Order, to take into account:

(1) what determination the former Ombudsman might have been expected to reach, and

(2) what amount (if any) might have been expected to be awarded by way of compensation;

in relation to an equivalent complaint dealt with under the former scheme in question immediately before commencement.

01/04/2002

DISP 3.8.2A

In determining, in relation to a relevant transitional complaint, what is fair and reasonable in all circumstances of the case and what amount (if any) constitutes fair compensation for the purposes of section 229(2)(a) of the Act, the Ombudsman is required, under article 5(2) of the Mortgage and General Insurance Complaints Transitional Order, to take into account what determination might have been expected to be made under the former scheme in question and what amount (if any) might have been expected to have been awarded or recommended by way of compensation under that scheme, in relation to an equivalent complaint dealt with under the former scheme immediately before the relevant commencement date.

31/10/2004

The Ombudsman's determination

DISP 3.8.3

The Ombudsman's determination will include the following stages:

(1) When a complaint has been determined, the Ombudsman will give both the complainant and the firm a signed written statement of the determination, stating the reasons for it.

(2) The statement will invite the complainant to notify the Ombudsman in writing before the date specified in the statement whether he accepts or rejects the determination.

(3) If the complainant notifies the Ombudsman that he accepts the determination within the time limit set, it is final and binding on both the complainant and the firm.

(4) If the complainant either rejects the determination or does not notify the Ombudsman by the specified date that he accepts the determination, the complainant will be treated as having rejected the determination, and the firm will not be bound by it.

(5) The Ombudsman must notify the firm of the complainant's response (or lack of response).

01/04/2002

DISP 3.9

Awards by the Ombudsman

01/12/2004

Money awards

DISP 3.9.1

As provided for under section 229 of the Act (Awards), if a complaint is determined in favour of the complainant, the determination may include:

(1) a money award against the firm of such amount as the Ombudsman considers fair compensation for financial loss or for loss or damage of a kind specified in DISP 3.9.2 G and subject to the maximum limit in DISP 3.9.5 R; or

(2) a direction that the firm take such steps in relation to the complainant as the Ombudsman considers just and appropriate (whether or not a court could order those steps to be taken); or

(3) both of these.

01/04/2002

DISP 3.9.2

Where the Ombudsman decides to make a money award, in addition to (or instead of) awarding compensation for financial loss, he may award compensation for the following kinds of loss or damage, whether or not a court would award compensation:

(1) pain and suffering; or

(2) damage to reputation; or

(3) distress or inconvenience.

01/04/2002

DISP 3.9.3

For the purposes of awards by the Ombudsman, financial loss includes consequential or prospective loss.

01/04/2002

DISP 3.9.4

In determining, in relation to a relevant new complaint, what amount (if any) constitutes fair compensation for the purposes of a money award, the Ombudsman is required under article 7(2) of the Ombudsman Transitional Order to take into account what amount (if any) might have been expected to be awarded by way of compensation, in relation to an equivalent complaint dealt with under the former scheme in question immediately before commencement.

01/04/2002

Limits on money awards

DISP 3.9.5

The maximum money award which the Ombudsman may make is £100,000.

01/04/2002

DISP 3.9.6

If the Ombudsman considers that an amount more than the maximum is required as fair compensation, then he may in addition recommend to the firm that it pays the balance.

01/04/2002

DISP 3.9.7

The Ombudsman may specify in his award that reasonable interest must be paid on the award (at the rate and from the date he states).

01/04/2002

DISP 3.9.8

For the purposes of calculating the monetary limit referred to in DISP 3.9.5 R the amount of interest awarded does not form part of the award itself.

01/04/2002

DISP 3.9.9

The limit on the maximum money award has no bearing on any direction which an Ombudsman may make as part of a determination.

01/04/2002

Costs

DISP 3.9.10

When the Ombudsman finds in a complainant's favour, he may also award an amount which covers some or all of the costs which were reasonably incurred by the complainant in respect of the complaint.

01/04/2002

DISP 3.9.11

It is not anticipated that awards of costs will be common, since in most cases complainants should not need to have professional advisers to bring complaints to the Financial Ombudsman Service.

01/04/2002

DISP 3.9.12

The amount payable under the award of costs may, if the Ombudsman orders, bear interest at a reasonable rate specified in the order and from a date specified in the order.

01/04/2002

DISP 3.9.13

For the purposes of calculating the monetary limit specified in DISP 3.9.5 R, an award of costs does not form part of the award itself.

01/04/2002

Complying with awards and settlements

DISP 3.9.14

A firm must comply promptly with:

(1) any money award or direction made by the Ombudsman or any award of money or other award made by an ombudsman appointed under the PIA Ombudsman scheme (including any interest payable by order of the PIA Ombudsman or the Ombudsman); and

(2) any settlement which it agrees at an earlier stage of the procedures.

01/06/2003

DISP 3.9.15

The Ombudsman must maintain a register of each money award and direction made.

01/04/2002

DISP 3.9.16

A money award registered in accordance with DISP 3.9.15 R can be recovered or enforced through the courts under paragraph 16 of Schedule 17 to the Act.

01/04/2002

DISP 3.9.17

A complainant may enforce a direction by injunction or order in accordance with section 229(9) of the Act (Awards).

01/04/2002

DISP 3.10

Dealing with information

01/12/2004

DISP 3.10.1

(1) In dealing with any information received in relation to the consideration or investigation of a complaint, the Financial Ombudsman Service must have regard to the parties' rights of privacy.

(2) Paragraph (1) does not prevent the Ombudsman disclosing information (either in full, or where he considers it necessary or appropriate under DISP 3.5.2 R (2), in the form of an edited version or (where this is not practicable) a summary or description):

(a) to the extent that he is required or authorised to do so by law; or

(b) to the parties to the complaint; or

(d) at a hearing in connection with the complaint.

(3) So long as he has regard to the parties' rights of privacy, the Ombudsman may disclose information to the FSA or any other body exercising regulatory or statutory functions for the purpose of assisting that body or the Financial Ombudsman Service to discharge its functions.

01/04/2002

DISP 3.10.2

Under article 11 of the Ombudsman Transitional Order and article 11 of the Mortgage and General Insurance Complaints Transitional Order, any information held by any person responsible for the operation of a former scheme in connection with the operation of a former scheme may be disclosed by that person (after commencement or, as the case may be, the relevant commencement date) to FOS Ltd or to an Ombudsman without contravening any restriction on disclosure of that information (imposed by statute or otherwise) to which that person was subject. But FOS Ltd or the Ombudsman is subject to any restrictions on disclosure (and exceptions) which would have applied to the former holder of that information.

31/10/2004

DISP 3.10.3

Article 11 of the Ombudsman Transitional Order and article 11 of the Mortgage and General Insurance Complaints Transitional Order do not, however, prevent the application of section 31(4A) of the Data Protection Act 1998. This provides for an exemption in respect of subject information provisions to the extent to which the application of those provisions to data would be likely to prejudice the proper discharge of the functions conferred under Part XVI of the Act (The Ombudsman Scheme).

31/10/2004

DISP 4

Standard terms

DISP 4.1

Application and Purpose

01/12/2004

Application

DISP 4.1.1

The standard terms apply to any company, partnership, individual practitioner or other business which has decided to be a participant in the Voluntary Jurisdiction (a VJ participant). They are fixed by FOS Ltd with the approval of the FSA in accordance with paragraph 18 of Schedule 17 to the Act.

01/04/2002

Purpose

DISP 4.1.2

The standard terms are the basis on which complaints will be dealt with and determined under the Voluntary Jurisdiction. They cover:

(1) the rules and guidance for handling complaints (see DISP 4.2.2 R to DISP 4.2.6 R);

(2) an indemnity for FOS Ltd, any member of its governing body, any member of its staff and any person acting as an Ombudsman, as permitted by paragraph 18(5) of Schedule 17 to the Act (see DISP 4.2.7 R);

(3) the Ombudsman's powers relating to determinations and awards (see DISP 4.2.8 R);

(4) the enforcement of a determination (see DISP 4.2.10 R); and

(5) the process for withdrawal by a VJ participant from the Voluntary Jurisdiction (see DISP 4.2.11 R).

01/04/2002

DISP 4.2

The standard terms

01/12/2004

DISP 4.2.1

(1) For the purposes of the standard terms, a company, partnership, individual practitioner or other business, whether authorised or unauthorised, agreeing to participate in the Voluntary Jurisdiction of the Financial Ombudsman Service is known as a VJ participant.

(2) In consequence of the agreement by the VJ participant to participate in the Voluntary Jurisdiction, the standard terms fix the basis on which complaints relating to relevant acts or omissions of the VJ participant are to be dealt with and determined.

(3) Where the standard terms apply rules relating to the Compulsory Jurisdiction for the purposes of the Voluntary Jurisdiction, those are to be treated as part of the standard terms.

(4) A VJ participant is subject to the standard terms, which may be amended or supplemented with the approval of the FSA.

01/04/2002

Complaint handling procedures

DISP 4.2.2

The rules and guidance contained in DISP 1 (Complaint handling procedures for firms) will apply to VJ participants for the purposes of the Voluntary Jurisdiction as if they were firms, with the exception of DISP 1.1.1 R (Application) and DISP 1.5 (Record keeping and reporting). DISP 1.2 (Internal complaint handling procedures: general requirements) applies in relation to complaints about activities of the VJ participant specified in DISP 2.6.9 R.

01/04/2002

DISP 4.2.3

DISP 1.5.1 R contains a requirement for a firm in the Compulsory Jurisdiction to make and retain records of complaints subject to DISP 1.4 - DISP 1.6 for a minimum period of three years from the date of its receipt of a complaint. Although this requirement is not applied to VJ participants, they may need to keep records of complaints for sufficient time to enable them to provide the Ombudsman with necessary information in the event of a complaint being referred to the Financial Ombudsman Service. The requirement for reporting complaints to the FSA under DISP 1.5.4 R is also not applied to VJ participants.

01/12/2004

Jurisdiction of the Financial Ombudsman Service

DISP 4.2.4

The rules and guidance contained in DISP 2 will apply for the purposes of the Voluntary Jurisdiction, with the exception of DISP 2.6.1 R - DISP 2.6.8 G.

01/04/2002

DISP 4.2.5

By agreeing to participate in the Voluntary Jurisdiction, a VJ participant also agrees to complaints relating to activities covered by DISP 2.6.9 R being dealt with under DISP 2.6.12 R.

01/04/2002

Complaint handling procedures of the Financial Ombudsman Service

DISP 4.2.6

The rules and guidance contained in DISP 3 will apply to VJ participants for the purposes of the Voluntary Jurisdiction as if they were firms (except where their application to VJ participants is specifically excluded or necessarily inapplicable).

01/04/2002

Liability

DISP 4.2.7

(1) None of the following is to be liable in damages for anything done or omitted in the discharge, or purported discharge, of any functions in connection with the Voluntary Jurisdiction:

(a) FOS Ltd;

(b) any member of its governing body;

(d) any person acting as an Ombudsman for the purposes of the Financial Ombudsman Service.

(2) Paragraph (1) does not apply:

(a) where the act or omission is shown to have been in bad faith; or

(b) so as to prevent an award of damages made in respect of an act or omission on the ground that the act or omission was unlawful as a result of section 6(1) of the Human Rights Act 1998.

01/04/2002

Determination and awards

DISP 4.2.8

If the Ombudsman determines a complaint under the Voluntary Jurisdiction in favour of the complainant, the determination may include:

(1) a "money award", that is, an award against the VJ participant of such amount as the Ombudsman considers fair compensation for financial loss or for loss or damage of a kind specified in DISP 3.9.2 G that has been suffered, or may be suffered, by the complainant;

(2) a direction that the VJ participant take such steps in relation to the complainant as the Ombudsman considers just and appropriate (whether or not a court could order those steps to be taken).

01/04/2002

DISP 4.2.9

DISP 4.2.8 R gives the Ombudsman the same powers to make money awards and directions as he has, under section 229 of the Act (Awards), in relation to firms in the Compulsory Jurisdiction.

01/04/2002

Enforcement of a determination

DISP 4.2.10

The Ombudsman's determination, if accepted by the complainant within the time limit specified by the Ombudsman, will be binding on the VJ participant and final, and may be enforced in court by the complainant.

01/04/2002

Withdrawal from the Voluntary Jurisdiction of the Financial Ombudsman Service

DISP 4.2.11

A VJ participant may not withdraw from the Voluntary Jurisdiction of the Financial Ombudsman Service unless the VJ participant:

(1) has submitted a written plan to FOS Ltd setting out its proposals for:

(a) notifying its existing customers of its intention to withdraw from the Voluntary Jurisdiction; and

(b) the handling of complaints against it prior to its withdrawal from the Voluntary Jurisdiction; and

(2) the plan has been approved in writing by FOS Ltd; and

(3) the VJ participant has paid the general levy for the year in which it withdraws and any other fees payable; and

(4) FOS Ltd has agreed in writing the date on which the VJ participant may withdraw from the Voluntary Jurisdiction (which date is not to be earlier than six months from the date of approval of the plan).

01/04/2002

DISP 4.2.12

The following rules in DISP 5 apply (subject to DISP 4.2.13 R) to VJ participants as part of their agreement to be subject to the Voluntary Jurisdiction as if they were authorised firms, but subject to the variations stated in each case.

(1) DISP 5.4.6 R (general levy) subject to substituting the words 'Voluntary Jurisdiction' for 'Compulsory Jurisdiction' and substituting the words 'FOS Ltd' for 'the FSA';

(2) DISP 5.4.8 R (calculation of general levy);

(3) DISP 5.5.1 R (information) subject to substituting the words 'FOS Ltd' for 'FSA';

(4) DISP 5.6.1 R (standard case fee);

(5) DISP 5.6.6 R (special case fee);

(6) DISP 5.7.5 R subject to substituting 'to FOS Ltd' for 'to the FSA' and DISP 5.7.6 R (supplementary levy for establishment costs) subject to substituting 'Part 4' for 'Part 2';

(7) DISP 5.8.1 R subject to substituting 'to FOS Ltd' for 'to the FSA' and 'by FOS Ltd' for 'by the FSA', DISP 5.8.2 R to DISP 5.8.4 R, DISP 5.8.5 Gsubject to substituting 'FOS Ltd will' for 'FSA will', DISP 5.8.6 R, DISP 5.8.8 R and DISP 5.8.9 R (payment).

(8) DISP 5.9.1 R and DISP 5.9.2 R (joining the Financial Ombudsman Service);

(9) DISP 5 Annex 1 (fees payable).

01/12/2004

DISP 4.2.13

A VJ participant which joins the Voluntary Jurisdiction before the end of the financial year in which the commencement day falls must pay to FOS Ltd the special case fee specified in DISP 5 Annex 1 for DISP 5.6.10 R in respect of each chargeable case falling within the Voluntary Jurisdiction and closed under the Financial Ombudsman Service before 31 March 2002, unless it was, immediately before the commencement day, a member of a former scheme, which was paid an agreed sum to the FOS Ltd in respect of the handling of complaints against its former members up to 31 March 2002.

01/12/2004

DISP 4.2.14

At commencement, the general levy, supplementary levy and standard and special case fees which will apply to VJ participants under DISP 4.2.12 R will not have been fixed. So, in order to fund the Voluntary Jurisdiction until the end of 2001/02 financial year, VJ participants joining in the period up to the end of the first financial year after commencement will pay the special case fee in DISP 4.2.13 R. The fee is the same as that specified for firms not in former schemes which become subject to the Compulsory Jurisdiction at commencement.

01/12/2004

DISP 5

Funding Rules

DISP 5.1

Application

01/12/2004

DISP 5.1.1

This chapter applies to:

(1) every firm which is subject to the Compulsory Jurisdiction of the Financial Ombudsman Service; and

(2) every other person who is subject to the Compulsory Jurisdiction in relation to relevant complaints.

01/04/2002

DISP 5.1.2

The relevant provisions of DISP 5 are applied to VJ participants by the standard terms (see DISP 4).

01/04/2002

DISP 5.1.3

References in this chapter to "firms" are to be construed, where relevant, as including:

(1) in accordance with the Ombudsman Transitional Order, unauthorised persons subject to the Compulsory Jurisdiction in relation to relevant complaints (see Transitional Provisions 6 and 7); and

01/04/2002

Exemption

DISP 5.1.4

A firm which is exempt under DISP 1.1.7 R is also exempt from DISP 5.2 to DISP 5.8.

01/04/2002

DISP 5.1.5

A firm which ceases to be exempt under DISP 5.1.4 is to be treated, for the purposes of its contribution to the general levy, as a firm to which DISP 5.9 applies.

01/04/2002

DISP 5.1.6

A firm which becomes exempt under DISP 5.1.4 R during the course of a financial year is to be treated for the purposes of its contribution to the general levy, as a firm to which DISP 5.10 applies.

01/04/2002

DISP 5.2

Purpose

01/12/2004

DISP 5.2.1

The purpose of this chapter is to set out the requirements on firms to pay annual fees (through a general levy and supplementary levy invoiced and collected by the FSA on behalf of FOS Ltd) and case fees (invoiced and collected directly by FOS Ltd) in order to fund the operation of the Financial Ombudsman Service. This chapter also contains a requirement on firms to pay a supplementary levy towards the costs of establishing the Financial Ombudsman Service. It also provides for unauthorised persons to pay case fees to FOS Ltd in respect of any relevant complaints which it handles.

01/04/2004

DISP 5.3

Introduction

01/12/2004

DISP 5.3.1

Paragraph 9 of Schedule 17 to the Act (The Ombudsman Scheme) requires FOS Ltd to adopt an annual budget which has been approved by the FSA. The annual budget must distinguish between the costs of operating the Compulsory Jurisdiction and the Voluntary Jurisdiction.

01/04/2002

DISP 5.3.2

Section 234 of the Act (Industry Funding) enables the FSA to require the payment to it or to FOS Ltd, by firms or any class of firm, of specified amounts (or amounts calculated in a specified way) to cover the costs of:

(1) establishing the Financial Ombudsman Service; and

(2) its operation in relation to the Compulsory Jurisdiction.

01/04/2002

DISP 5.3.3

Paragraph 15 of Schedule 17 to the Act enables FOS Ltd to require firms subject to the Compulsory Jurisdiction and any other respondents to a complaint to pay specified fees to it in respect of complaints closed by the Financial Ombudsman Service.

01/04/2002

DISP 5.3.4

The Ombudsman Transitional Order provides for unauthorised persons to be charged fees in respect of any relevant complaints against them which the Financial Ombudsman Service handles.

01/04/2002

DISP 5.3.5

Paragraph 18 of Schedule 17 to the Act enables FOS Ltd to require VJ participants to pay to it such amounts at such times as it specifies in the standard terms.

01/04/2002

DISP 5.3.6

The relevant provisions of these rules will be applied to VJ participants through the standard terms made by FOS Ltd under paragraph 18 of Schedule 17 to the Act (see DISP 4).

01/04/2002

DISP 5.3.7

This chapter sets out the framework for the funding arrangements of the Financial Ombudsman Service, including the method by which fees will be calculated. Details of the actual fees payable will vary from year to year, depending on the annual budget of the Financial Ombudsman Service. These details will be set out in an annex to this chapter (DISP 5 Annex 1R R). A new annex will be prepared and consulted on for each financial year.

01/04/2002

DISP 5.4

The general levy

01/12/2004

DISP 5.4.1

Each financial year, the FSA and FOS Ltd will consult on the amount of the annual budget of the Financial Ombudsman Service which is to be raised by the general levy.

01/04/2002

DISP 5.4.2

For the purposes of the general levy, a firm will fall into one or more of the industry blocks set out in DISP 5 Annex 1R R depending on the business activities which it conducts.

01/04/2002

DISP 5.4.3

The FSA will determine, following consultation, the amount to be raised from each industry block. This will be based on the budgeted costs and numbers of Financial Ombudsman Service staff required to deal with the volume of complaints which the Financial Ombudsman Service expects to receive about the firms in each industry block. Modified arrangements have been made for certain types of small firms (see DISP 5.6.3 R to DISP 5.6.5 G).

01/04/2002

DISP 5.4.4

Part 2 of DISP 5 Annex 1R Rsets out the fee tariffs for each industry block.

01/04/2002

DISP 5.4.5

The FSA will specify a minimum levy for firms in each industry block.

01/04/2002

DISP 5.4.6

A firm must pay to the FSA a general levy towards the costs of operating the Compulsory Jurisdiction of the Financial Ombudsman Service.

01/04/2004

DISP 5.4.7

Under the standard terms, VJ participants will be required to pay to FOS Ltd an amount calculated on a similar basis towards the costs of operating the Voluntary Jurisdiction of the Financial Ombudsman Service. FOS Ltd will be responsible for invoicing and collecting this amount.

01/04/2004

DISP 5.4.8

A firm's general levy is calculated as follows:

(1) identify each of the tariff bases set out in part 2 of DISP 5 Annex 1R R which apply to the relevant business of the firm for the relevant year;

(2) for each of those tariff bases, calculate the sum payable in relation to the relevant business of the firm for that year;

(3) add together the amounts calculated under (2).

01/04/2002

DISP 5.4.9

For the purpose of DISP 5.4.6 R and DISP 5.4.8 R, a member of the Society of Lloyd's or a managing agent at Lloyd's will not in that capacity be treated as a firm but the Society of Lloyd's will pay a general levy in respect of Lloyd's insurance business conducted with eligible complainants.

01/04/2002

DISP 5.4.10

For the purpose of DISP 5.4, references to relevant business for a firm which falls in industry block 16 or 17 and which so elects under part 2 of DISP 5 Annex 1R R, are references to the firm's total amount of annual income reported in accordance with Part 2 of SUP 20 Annex 1.

31/10/2004

DISP 5.5

Information requirement

01/12/2004

DISP 5.5.1

(1) A firm must provide the FSA by the end of February each year (or, if the firm has become subject to the Financial Ombudsman Service part way through the financial year, by the date requested by the FSA) with a statement of the total amount of relevant business (measured in accordance with the appropriate tariff base(s)) which it conducted, as at or in the year to 31 December of the previous year as appropriate, in relation to the tariff base for each of the relevant industry blocks set out in part 2 of DISP 5 Annex 1R R.

(2) Paragraph (1) does not apply if the firm pays a general levy on a flat fee basis only.

(3) If a firm cannot provide a statement of the total amount of relevant business as required by DISP 5.5.1 R, it must provide the best estimate of the amount of relevant business that it conducted.

(4) For the purpose of DISP 5.5.1 R, references to relevant business for a firm which falls in industry block 16 or 17 and which so elects under part 2 of DISP 5 Annex 1R R, are references to the firm's total amount of annual income reported in accordance with Part 2 of SUP 20 Ann 1.

(5) If a firm does not submit a complete statement by the date on which it is due in accordance with this rule and any prescribed submission procedures:

(a) the firm must pay an administrative fee of £250 (but not if it is already subject to an administrative fee under SUP 20 Annex 2 Part 1 or COMP 13.6.14 R for the same financial year); and

(b) the general levy and any supplemental levy will be calculated using (where relevant) the valuation or valuations of business applicable to the previous period, multiplied by the factor of 1.10 (or, if a firm has become subject to the Financial Ombudsman Service part way through the financial year, on the basis of the information provided to FSA for the purposes of SUP 20.3.2 R) or on any other reasonable basis, making such adjustments as seem appropriate in subsequent levies once the true figures are known.

01/04/2005

DISP 5.5.1A

Failure to submit a statement in accordance with the rules in this chapter may also lead to the imposition of a financial penalty and other disciplinary sanctions (see ENF 13.5).

01/04/2005

DISP 5.5.2

SUP 16.3 (General provisions on reporting) contains further rules on the method of submission of reports under DISP 5.5.1 R.

01/04/2002

DISP 5.5.2A

A firm should not provide a statement of relevant business if it deals only with eligible complainants who are not private individuals. Relevant business is defined in the Glossary as business done with private individuals only. So DISP 5.5.1 R does not apply in relation to business done with other types of eligible complainant described in DISP 2.4.3 R (1)(b), (c) and (d); the funding of FOS Ltd in relation to that business is by special case fee only (see DISP 5.6.6 R).

01/04/2003

DISP 5.6

Case fees

01/12/2004

Standard case fee

DISP 5.6.1

A firm must pay to FOS Ltd the standard case fee specified in part 3 of DISP 5 Annex 1R R in respect of each chargeable case relating to that firm which is closed by the Financial Ombudsman Service, unless a special case fee is payable or has been paid in respect of that case under DISP 5.6.6 R to DISP 5.6.12 R.

01/04/2002

DISP 5.6.2

The standard case fee, which will be subject to consultation each year, will be calculated by dividing the annual budget for the Compulsory Jurisdiction, less the amount to be raised by the general levy, by the estimated number of chargeable cases which the Financial Ombudsman Service expects to close in the relevant financial year.

01/04/2002

DISP 5.6.3

A credit union which is subject to the minimum levy in an industry block is not required to pay a standard case fee in respect of chargeable cases relating to that industry block.

01/04/2002

DISP 5.6.4

Any firm falling into either industry block 13 or industry block 15 in part 2 of DISP 5 Annex 1R R is not required to pay the standard case fee in respect of chargeable cases relating to those industry blocks.

01/04/2002

DISP 5.6.5

The firms in industry blocks 13 and 15 are cash plan health providers and small friendly societies. These arrangements have been made in respect of these firms to take account of the fact that the amount at issue is likely to be small relative to the case fee. Instead, the full unit cost of handling complaints against these firms will be recovered through the general levy in accordance with the relevant tariff-base and no case fee will be payable. Similar arrangements have been made under DISP 5.6.3 R in respect of small credit unions.

01/04/2002

Special case fees: complaints from small businesses

DISP 5.6.6

A firm must pay to FOS Ltd a special case fee, as specified in part 3 of DISP 5 Annex 1R R in respect of each chargeable case relating to that firm closed by the Financial Ombudsman Service which was referred to the Financial Ombudsman Service by eligible complainants who fall within DISP 2.4.3 R(1)(b), (c) or (d).

01/04/2002

Special case fees: firms which cease to be authorised

DISP 5.6.7

A firm which ceases to be authorised must pay to FOS Ltd a special case fee, as specified in part 3 of DISP 5 Ann 1R, in respect of each chargeable case relating to that firm closed by the Financial Ombudsman Service which concerned an act or omission occurring when the firm was authorised and where the complaint was made after its authorisation ceased.

01/04/2002

Special case fees: relevant complaints against persons who were subject to a former scheme

DISP 5.6.8

An unauthorised person who is subject to the Compulsory Jurisdiction in relation to a relevant complaint must pay to FOS Ltd a special case fee as specified in part 3 of DISP 5 Annex 1R R in respect of each chargeable case relating to that unauthorised person closed by the Financial Ombudsman Service.

01/04/2002

DISP 5.6.9

Under the Ombudsman Transitional Order, FOS Ltd can handle complaints about members of a former scheme which that scheme could have handled before commencement, even if the unauthorised person concerned does not become authorised by the FSA after that date. Where FOS Ltd handles such complaints, the unauthorised person concerned will be required to pay a special case fee.

01/04/2002

Special case fees for 2001/02

DISP 5.6.10

A firm which was a member of PIA before commencement must pay to FOS Ltd a special case fee, as specified in DISP 5 Annex 1R R, in respect of each chargeable case relating to that firm received by the Financial Ombudsman Service after commencement and before 31 March 2002.

01/04/2002

DISP 5.6.11

DISP 5.6.10 R does not apply in relation to a chargeable case which relates to a complaint which proceeded or would have proceeded under a former scheme other than the PIAOB scheme.

01/04/2002

DISP 5.6.12

A firm which was not a member of a former scheme before the commencement day must pay to FOS Ltd a special case fee, as specified in DISP 5 Annex 1R R, in respect of each chargeable case which relates to business conducted by the firm after the commencement day and which is closed by the Financial Ombudsman Service before 31 March 2002.

01/04/2002

DISP 5.6.13

The relevant provisions of DISP 5.6 will be applied to VJ participants through the standard terms.

01/04/2002

DISP 5.6.14

A firm which was, before commencement, a member of PIA and a former scheme other than the PIAOB scheme will not, on account of the exclusion in DISP 5.6.11 R, be required to pay the special case fee specified by DISP 5.6.10 R in respect of all chargeable cases relating to it but only those which arise in respect of investment business matters which would have been eligible under the PIAOB scheme.

01/04/2002

Case fee exemption

DISP 5.6.15

Notwithstanding the above, a firm will only be liable for, and FOS will only invoice for, the standard case fee or, as the case may be, the special case fee, in respect of the third and subsequent chargeable cases in any financial year.

01/04/2005

DISP 5.7

The supplementary levy

01/12/2004

DISP 5.7.1

For the purposes of calculating the supplementary levy, the FSA will apportion the establishment costs between the industry blocks in the same proportions as the operating costs for the purposes of the general levy. The supplementary levy will therefore be raised from firms on the same basis and at the same time as the general levy (see part 2 of DISP 5 Annex 1R R).

01/04/2002

DISP 5.7.2

The establishment costs will be recovered via the supplementary levy over the first three full financial years of the Financial Ombudsman Service's operation.

01/04/2002

DISP 5.7.3

The amount of establishment costs to be raised each year through the supplementary levy will be specified in part 2 of DISP 5 Annex 1R R.

01/04/2002

DISP 5.7.4

The supplementary levy will be identified separately from the general levy for the purposes of invoicing firms and VJ participants.

01/04/2002

DISP 5.7.5

A firm must pay to the FSA a supplementary levy towards the costs of establishing the Financial Ombudsman Service.

01/04/2002

DISP 5.7.6

A firm's supplementary levy is a sum payable in accordance with the fee tariffs set out in part 2 of DISP 5 Ann 1R and will be calculated by following the steps set out in DISP 5.4.8R.

01/04/2002

DISP 5.7.7

Under the standard terms, VJ participants will also be required to pay an amount calculated on a similar basis towards the costs of establishing the Voluntary Jurisdiction of the Financial Ombudsman Service.

01/04/2002

DISP 5.8

Payment

01/12/2004

DISP 5.8.1

A firm must pay annually to the FSA the general levy and any supplementary levy to which it is subject, on or before the later of 1 April and 30 calendar days after the date when the invoice is issued by the FSA.

01/04/2004

DISP 5.8.2

A firm must pay to FOS Ltd any standard case fee or special case fee which it is liable to pay under DISP 5.6.1 R, DISP 5.6.6 R, DISP 5.6.7 R, DISP 5.6.8 R, DISP 5.6.10 R, or DISP 5.6.12 R, as appropriate, in respect of chargeable cases for which it is invoiced by FOS Ltd within 30 calendar days of the date when the invoice is issued by FOS Ltd.

01/04/2002

DISP 5.8.3

The Financial Ombudsman Service will invoice firms for case fees on a monthly basis and firms will be required to pay these fees within 30 calendar days of receiving the invoice.

01/04/2002

DISP 5.8.4

A firm or an unauthorised person who is subject to the Compulsory Jurisdiction in relation to a relevant complaint must pay any standard case fee or special case fee within 30 calendar days of the date when the invoice is issued by FOS Ltd.

01/04/2002

DISP 5.8.5

The FSA will issue invoices for the general levy and any supplementary levy. FOS Ltd will issue invoices for standard case fees and special case fees. Each invoice will be payable within 30 calendar days. Invoices will be sent to the firm's Compliance Officer at the principal place of business in the United Kingdom last notified to the FSA. A firm which is liable to pay under DISP 5.8.1 R may do so by direct debit agreement.

01/04/2002

DISP 5.8.6

If a firm or an unauthorised person does not pay a levy or case fee in full within 30 calendar days of the date when the invoice is issued, it must, from that date, pay an administrative fee of £250 plus interest on any unpaid part of the levy or fee at a rate of 5% over the Bank of England's repo rate, from time to time in force, accruing on a daily basis from the date on which the amount concerned became due.

01/04/2005

DISP 5.8.7

If a firm (or unauthorised person) subject to the Compulsory Jurisdiction fails to make payment under this chapter of standard or special case fees, after expiry of the 30 day period, FOS Ltd may:

(1) Take steps to recover any money owed (including interest);

(2) Refer the matter to the FSA so that the FSA may take whatever disciplinary action it considers necessary.

01/04/2002

DISP 5.8.7A

If a firm (or unauthorised person) fails to make payment under this chapter of the general levy and any supplementary levy to which it is subject, after the expiry of the 30 day period, the FSA may take whatever action it considers appropriate including steps to recover any money owed (with interest) and commencing disciplinary proceedings.

01/04/2004

DISP 5.8.8

If it appears to the FSA or FOS Ltd that, owing to the exceptional circumstances of a particular case, the payment of any fee would be inequitable, the FSA or FOS Ltd may reduce or remit all or part of the fee in question which would otherwise be payable.

01/04/2002

DISP 5.8.9

If it appears to the FSA or FOS Ltd that, owing to the exceptional circumstances of a particular case to which DISP 5.8.8 R does not apply, the retention by the FSA or FOS Ltd of a fee which has been paid would be inequitable, the FSA or FOS Ltd may refund all or part of the fee.

01/04/2002

DISP 5.9

Joining the Financial Ombudsman Service

01/12/2004

DISP 5.9.1

A firm which becomes subject to the Financial Ombudsman Service part way through a financial year must pay a rateable proportion of the general levy and the supplementary levy as indicated in Table DISP 5.9.2 R.

01/04/2002

DISP 5.9.2

Table DISP 5.9.2

Quarter in which the firm becomes subject to the Financial Ombudsmen Service

Proportion payable

1 April to 30 June inclusive

100%

1 July to 30 September inclusive

75%

1 October to 31 December inclusive

50%

1 January to 31 March inclusive

25%

01/04/2002

DISP 5.10

Leaving the Financial Ombudsman Service

01/12/2004

DISP 5.10.1

Where a firm ceases to be authorised part way through a financial year:

(1) it will remain liable to pay standard case fees in respect of chargeable cases against it closed by the Financial Ombudsman Service for the remainder of that financial year; and

(2) it must pay the special case fee specified under DISP 5.6.7 Rin respect of any other chargeable cases against it closed by the Financial Ombudsman Service.

01/04/2002

DISP 5.10.2

Firms which cease to be authorised and therefore subject to the Compulsory Jurisdiction part way through the year will not receive a refund of their general levy (or supplementary levy) except in exceptional circumstances. Firms will continue to be liable for any case fees relating to chargeable cases closed by the Financial Ombudsman Service after they cease to be authorised. Firms will be charged the standard case fee where the complaint was closed by the Financial Ombudsman Service before the end of the year in which their authorisation ceased. The special case fee will apply to any complaint closed after the end of that year since the firm will no longer be contributing to the general levy.

01/04/2002

DISP 5 Annex 1R

DISP 5 Ann 1R: Annual Fees Payable in Relation to 2005/06

01/06/2005

Introduction: annual budget

The annual budget for 2005/06 approved by the FSA is £53.1m.

Part 1: General levy and supplementary levy

The total amount expected to be raised through the general levy in 2005/06will be £11.067m.

Part 2: Fee tariffs for general levy and supplementary levy

No establishment costs will be raised in 2005/06 by the supplementary levy.

Industry block

Tariff base

General levy payable by firm

1-Deposit acceptors, mortgage lenders and administrators (excluding firms in block 14)

Number of accounts relevant to the activities in DISP 2.6.1 R

£0.00356 per relevant account, subject to a minimum levy of £100

2-Insurers - general (excluding firms in blocks 13 & 15)

Relevant annual gross premium income

£0.044 per £1,000 of relevant annual gross premium income, subject to a minimum levy of £100

3-The Society (of Lloyd's)

Not applicable

£24,048 to be allocated by the Society

4-Insurers - life (excluding firms in block 15)

Relevant adjusted annual gross premium income

£0.10 per £1,000 of relevant adjusted annual gross premium income, subject to a minimum levy of £100

5-Fund managers (including those holding client money/assets and not holding client money/assets)

Relevant funds under management

£0.0009 per £1,000 of relevant funds under management, subject to a minimum levy of £100

6-Operators, trustees and depositaries of collective investment schemes

Flat fee

Levy of £75

7-Dealers as principal

Flat fee

Levy of £50

8-Advisory arrangers, dealers or brokers holding and controlling client money and/or assets

Number of relevant approved persons (controlled functions 21, 22, 24, 25, 26)

£100 per relevant approved person (controlled functions 21, 22, 24, 25, 26), subject to a minimum levy of £100

9-Advisory arrangers, dealers or brokers not holding and controlling client money and/or assets

Number of relevant approved persons (controlled functions 21, 22, 24, 25, 26)

£25 per relevant approved person (controlled functions 21, 22, 24, 25, 26), subject to a minimum levy of £50

10-Corporate finance advisers

Flat fee

Levy of £50

11-

N/A for 2004/05

12-

N/A for 2004/05

13-Cash plan health providers

Flat fee

Levy of £50

14-Credit unions

Flat fee

Levy of £50

15-Friendly societies whose tax-exempt business represents 95% or more of their total relevant business

Flat fee

Levy of £50

16 - Mortgage lenders, advisers and arrangers (excluding firms in blocks 13, 14 & 15)

Flat fee

Levy of £50

17 - General insurance mediation (excluding firms in blocks 13, 14 & 15)

Flat fee

Levy of £50

[not used]

The industry blocks in the table are based on the equivalent activity groups set out in Part 1 of SUP 20 Annex 1 R.

Where the tariff base in the table is defined in similar terms as that for the equivalent activity group in Part 2 of SUP 20 Annex 1 R, it must be calculated in the same way as that tariff base - taking into account only the firm's relevant business.

PART 3: Case fees

Table: Standard case fees and special case fees in relation to 2005/2006

Governing provisions

Case Fee

Amount

DISP 5.6.1 R

Standard case fee

£360

DISP 5.6.6 R

Special case fee: complaints from small businesses

£475

DISP 5.6.7 R

Special case fee: firms which cease to be authorised

£475

DISP 5.6.8 R

Special case fee: relevant complaints against persons who were subject to a former scheme

£475

Part 4: Fee Tariffs and case fees for VJ participants

Table: Fee tariffs and case fees for VJ participants in relation to 2005/2006

Voluntary jurisdiction industry block

Tariff base

General levy payable by firm

Minimum general levy per firm

Case fee*

Deposit acceptors, mortgage lenders and administrators

Number of relevant accounts

£0.00383 per relevant account

£100

£360

VJ participants undertaking insurance activities subject only to prudential regulation

Relevant annual gross premium income

£0.000044 per £1 of relevant annual gross premium income

£100

£360

VJ participants undertaking insurance activities subject to prudential and conduct of business regulation

Relevant adjusted annual gross premium income

£0.000094 per £1 of relevant adjusted annual gross premium income

£100

£360

[No longer applicable.]

Other intermediaries

Not applicable

£360

VJ participants not falling into any of the above categories

Not applicable

£475

National Savings and Investments business

Not applicable

£10,000

£360

The industry blocks in the table are based on the equivalent activity groups for authorised firms, as set out in part 1 of SUP 20 Ann 1R.

10.

Where the tariff base in the table is defined in similar terms as the tariff base for the equivalent activity group set out in part 2 of SUP 20 Ann 1R, it must be calculated in the same way as that tariff base except that it takes into account only the VJ participant's relevant business.

11.

'Relevant business' for the purposes of funding the Voluntary Jurisdiction means that part of a VJ participant's business which it conducts with private individuals and which is subject to the Voluntary Jurisdiction of the Financial Ombudsman Service as provided for in DISP 2.6.9 R (The Voluntary Jurisdiction), as measured by the appropriate tariff base for each industry block.

Note on case fees

12.

As for the Compulsory Jurisdiction, firms will only be charged for the third and subsequent chargeable case in any financial year.

01/06/2005

DISP App 1

Relevant Existing Complaints

DISP App 1.1

Application and Purpose

01/12/2004

Application

DISP App 1.1.1

This appendix applies to firms, to FOS Ltd, to the Ombudsman and to those who might wish to refer a complaint to the Financial Ombudsman Service in respect of relevant existing complaints.

01/04/2002

DISP App 1.1.2

References in this chapter to "firms" are to be construed, where relevant, as including:

(1) in accordance with the Ombudsman Transitional Order, unauthorised persons subject to the Compulsory Jurisdiction in relation to relevant complaints; and

01/04/2002

Purpose

DISP App 1.1.3

DISP 2 to DISP 5 apply to firms, to the Ombudsman and to FOS Ltd in respect of relevant existing complaints, except as stated in this appendix.

01/04/2002

DISP App 1.1.4

The purpose of this appendix is to describe how FOS Ltd must handle relevant existing complaints (that is, the partly completed complaints which it inherits from the former schemes at commencement under the Ombudsman Transitional Order). Complaints which firms (as opposed to the former schemes) have partly completed at commencement will be handled as described in DISP 1 (Complaint handling procedures for firms) (see, in particular, DISP 1.4.6 R).

01/04/2002

DISP App 1.1.5

Relevant existing complaints will be referred by the former schemes to FOS Ltd for completion at commencement. Article 2 of the Ombudsman Transitional Order provides that FOS Ltd will complete the handling of these cases, but requires that, in a significant number of respects, it must do this in accordance with the requirements of the relevant former scheme.

01/04/2002

DISP App 1.1.6

This appendix describes the ways in which FOS Ltd is required to treat these complaints differently from the other complaints which are subject to DISP 1 to DISP 5. Apart from these exceptions, the rules in DISP 2 to DISP 5 and the statutory provisions in sections 225-234 of the Act apply as they do to other complaints.

01/04/2002

DISP App 1.2

Eligible complaint

01/12/2004

DISP App 1.2.1

(1) Article 2 of the Ombudsman Transitional Order requires that, irrespective of whether the conditions set out in section 226(2) of the Act are met (see DISP 2.2.1 G), a complaint which:

(a) was referred to a former scheme (other than the Personal Insurance Arbitration Service) at any time before commencement, by a person who was at that time entitled, under the terms of the former scheme, to refer such a complaint (whether described in that scheme as the making of a complaint, the referral of a dispute, the submission of a claim, or otherwise), and

(b) has not, before commencement, been rejected, withdrawn, settled or determined, by the former Ombudsman (whether by a substantive decision, or by closure of the case without a substantive decision);

is to be dealt with under the Financial Ombudsman Service (and not the former scheme).

(2) These complaints are described as relevant existing complaints.

01/04/2002

DISP App 1.2.2

Article 2 of the Ombudsman Transitional Order provides that a complaint is not to be treated as determined before commencement if the determination was, at commencement, subject to (or capable of being subject to) an appeal, a reference to arbitration or similar procedure.

01/04/2002

DISP App 1.2.3

The definition of a relevant existing complaint excludes complaints referred to the Personal Insurance Arbitration Service before commencement, which will be completed by the Personal Insurance Arbitration Service, not FOS Ltd. It also excludes complaints about pre-commencement investment business conducted by firms which were formerly authorised by a recognised professional body. These will be handled by the relevant professional body.

01/04/2002

DISP App 1.3

Eligible complainant

01/12/2004

DISP App 1.3.1

Under article 2(1)(a) of the Ombudsman Transitional Order, a person will be treated under the Financial Ombudsman Service as an eligible complainant in respect of a relevant existing complaint, if he was entitled, under the terms of the former scheme, to refer such a complaint at the time when the complaint was referred to that scheme.

01/04/2002

DISP App 1.4

Time limits

01/12/2004

DISP App 1.4.1

Article 4(2) of the Ombudsman Transitional Order requires an Ombudsman to extend the time limits set under DISP 2.3.1 R(1)(b) and (c) in respect of a relevant existing complaint where the effect of that extension is that the time limit applying to the complaint is the same as that which would have applied under the former scheme in question as it had effect immediately before commencement.

01/04/2002

DISP App 1.5

Determination of complaints

01/12/2004

DISP App 1.5.1

Article 5(2)(a) provides that FOS Ltd's power to specify in its scheme rules the matters to be taken into account in making determinations does not apply to relevant existing complaints (see DISP 3.8.1 R).

01/04/2002

DISP App 1.5.2

Article 5(2)(c) requires the Ombudsman, in deciding whether a relevant complaint (including a relevant existing complaint) is to be dismissed without consideration of its merits under the scheme rules, to take into account whether an equivalent complaint would have been so dismissed under the former scheme in question, as it had effect immediately before commencement.

01/04/2002

DISP App 1.5.3

Article 6(1) disapplies, in respect of relevant existing complaints, the provisions in the Act relating to the criteria for determining complaints in section 228(2) and those relating to awards in section 229 (with the exception of those in section 229(8)(b) and paragraph 16 of Schedule 17 relating to the enforceability of money awards and those in section 229(9) and (10) relating to the enforceability of directions made by the Ombudsman). It also disapplies the provisions relating to costs awards in section 230, except to the extent referred to in DISP App 1.11.1 G.

01/04/2002

DISP App 1.5.4

Apart from this, section 228 of the Act applies in relation to relevant existing complaints as it applies to other complaints which are subject to the Compulsory Jurisdiction.

01/04/2002

DISP App 1.6

Criteria for determining complaints

01/12/2004

DISP App 1.6.1

Article 6(2) provides that a relevant existing complaint is to be determined (so far as practicable) by reference to such criteria as would have applied to the determination of the complaint by the former ombudsman under the former scheme in question immediately before commencement (provided that where the former scheme in question is the FSA scheme, the criteria are those which would have applied to the determination of the complaint by an independent investigator under that scheme at that time).

01/04/2002

DISP App 1.6.2

An exception is, however, made in respect of relevant existing complaints about former IMRO members inherited from the Investment Ombudsman under the IMRO scheme in order to reflect the way in which those complaints have been determined in practice under that scheme. The effect of article 6(2) and 6(11) taken together is that, as with all new complaints received after commencement, these will be determined according to what is, in the opinion of the Ombudsman, fair and reasonable in all the circumstances of the case and will be binding on both parties subject to the complainant's agreement.

01/04/2002

DISP App 1.7

Awards and remedies

01/12/2004

DISP App 1.7.1

The remedy that the Ombudsman can impose in determining a relevant existing complaint is limited by article 6(3) to such remedy as could have been included in a determination (whether described as a determination, award, recommendation or otherwise) made by the former Ombudsman under the former scheme in question immediately before commencement.

01/04/2002

DISP App 1.8

Extent to which awards are binding

01/12/2004

DISP App 1.8.1

Under article 6, except in the circumstances set out in DISP App 1.8.2 G to DISP App 1.8.6 G, the Ombudsman will, in respect of relevant existing complaints, provide the firm and the complainant with a written statement of his determination (including reasons) in accordance with section 228(3)-(9) of the Act (see DISP 3.8.3 R) and if the complainant notifies the Ombudsman, within the time period specified, that he accepts the determination, it is binding on both parties and final.

01/04/2002

DISP App 1.8.2

Under article 6(7), where the former scheme in question was the FSA scheme and the relevant existing complaint was, at commencement, subject to arbitration in accordance with that scheme, the extent to which the determination of the complaint under the new scheme is binding and final depends on the terms of the arbitration. Where a complaint under the FSA scheme was not subject to arbitration at commencement, the determination of the case under the new scheme is not binding on the firm or the complainant. The requirements in section 228 (4)(c) and (5) to (7) of the Act do not apply in relation to the complaint.

01/04/2002

DISP App 1.8.3

Under article 6(8), where the former scheme in question was the SFA scheme:

(1) if the relevant existing complaint has not been submitted to arbitration under that scheme, and would not have been eligible to be so submitted under that scheme as it had effect immediately before commencement (disregarding any requirement for certification by the SFA Complaints Bureau that the complaint had not been resolved by conciliation), the determination of the complaint under the Financial Ombudsman Service is not binding on the firm or the complainant;

(2) if the relevant existing complaint has been submitted to arbitration under the SFA scheme, or would have been eligible to be so submitted under that scheme as it had effect immediately before commencement (disregarding any such requirement), the determination of the complaint under the Financial Ombudsman Service is binding on the firm and the complainant and final, but if the complaint has been submitted to arbitration, the terms of arbitration are otherwise unaffected;

and the requirements in section 228(4)(c) and (5) to (7) of the Act do not apply in relation to the complaint.

01/04/2002

DISP App 1.8.4

Under article 6(9), where the former scheme in question was the Building Societies Ombudsman Scheme and the relevant existing complaint was, at commencement, subject to arbitration in accordance with that scheme, the extent to which the determination of the complaint under the Financial Ombudsman Service is binding and final depends on the terms of the arbitration (which remain unaffected), and the requirements in section 228(4)(c) and (5) to (7) of the Act do not apply in relation to the complaint.

01/04/2002

DISP App 1.8.5

Under article 6(10), where the former scheme in question was the Building Societies Ombudsman Scheme and the firm would have been relieved of its obligation to comply with a determination under that scheme if it had complied with conditions as to the giving of notice of its non-fulfilment of the obligations imposed by the determination, the determination of the complaint under the Financial Ombudsman Service is (notwithstanding section 228(5) of the Act) not binding on the firm if it complies with equivalent conditions. (This preserves the "publicity option" under the Building Societies Ombudsman Act 1986 in respect of relevant existing complaints.)

01/04/2002

DISP App 1.8.6

The effect of article 6(2) and 6(11) taken together is that, where the former scheme in question was the IMRO scheme, the determination will be binding on both parties subject to the complainant's agreement, unless, before commencement, the complaint has been determined by a former ombudsman under that scheme and the former ombudsman has offered the complainant adjudication (see DISP App 1.9.1 G-DISP App 1.9.2 G).

01/04/2002

DISP App 1.9

Complaints determined before commencement

01/12/2004

DISP App 1.9.1

Under article 8, where, before commencement, a relevant existing complaint has been determined by a former ombudsman under the IMRO scheme and that former ombudsman has offered adjudication:

(1) if the matter is already subject to adjudication at commencement, the relevant provisions of the former scheme will continue to apply so far as practicable, with references to the Investment Ombudsman or "the Ombudsman" being read as references to FOS Ltd or an Ombudsman, as appropriate; or

(2) if the matter has not been referred to adjudication before commencement, but the complainant accepts adjudication, FOS Ltd must appoint an adjudicator to determine the matter, and if the complainant agrees to the appointment of the adjudicator, the firm must concur in the reference to adjudication.

01/04/2002

DISP App 1.9.2

The relevant provisions of the IMRO scheme will apply, so far as practicable, as they would have applied to adjudication under that scheme, with references to the Investment Ombudsman or "the Ombudsman" being read as references to FOS Ltd or an Ombudsman, as appropriate.

01/04/2002

DISP App 1.9.3

Under article 9, where a relevant existing complaint has been determined before commencement by a person appointed as an arbitrator under the SFA scheme:

(1) if, at commencement, that determination is the subject of an appeal, or an application for leave to appeal, under that scheme which has not been determined or withdrawn, the relevant provisions of that scheme will continue to apply to that appeal or application (and any ensuing appeal) so far as practicable;

(2) if, at commencement, an application for leave to appeal against the determination was capable of being entertained under that scheme, the relevant provisions of that scheme will apply, so far as practicable, to the making of any such application for leave and any ensuing appeal, as they would have applied to an application for leave or an appeal before commencement.

01/04/2002

DISP App 1.9.4

FOS Ltd may appoint such persons, on such terms and for such duration, as it thinks fit to hear any appeal or application for leave to appeal made after commencement and references in the relevant provisions of the SFA scheme to the SFA or its Arbitration Secretariat will be read as references to FOS Ltd.

01/04/2002

DISP App 1.9.5

Under article 10, where a complaint has been determined before commencement under the Building Societies Ombudsman Scheme, and, at commencement, a case either has been stated with respect to that determination for the opinion of the High Court or Court of Session under section 84(5) to (7) of the Building Societies Act 1986 and no decision has been reached on the case or could be stated under those provisions, those subsections continue to apply as if they provided for the Court to direct that the complaint be dealt with under the Financial Ombudsman Service as a relevant existing complaint.

01/04/2002

DISP App 1.10

Enforceability of awards

01/12/2004

DISP App 1.10.1

Where the Ombudsman makes a determination which includes an award against a firm of compensation payable to the complainant, it is enforceable (under article 6(4)) in the same way as a money award made under the Compulsory Jurisdiction.

01/04/2002

DISP App 1.10.2

Where the Ombudsman makes a determination which includes a requirement for the firm to take any steps in relation to the complainant, it is enforceable (under article 6(5)) in the same way as a direction made under the Compulsory Jurisdiction.

01/04/2002

DISP App 1.11

Costs

01/12/2004

DISP App 1.11.1

Where the former scheme in question, as it had effect immediately before commencement, included provision for the award of costs, the Ombudsman may, under article 6(6), on determining the relevant existing complaint, award costs in accordance with that provision (irrespective of whether those costs were incurred, or relate to anything done, before or after commencement) and section 230(6) and (7) and paragraph 16 of Schedule 17 to the Act apply in relation to the enforcement of such an award of costs in the same way as they apply to awards of costs made under the Financial Ombudsman Service procedures.

01/04/2002

DISP App 1.12

Funding and fees

01/12/2004

DISP App 1.12.1

Under DISP 5, firms will be subject to case fees in respect of relevant complaints. If FOS Ltd deals with a relevant existing complaint against a person who is not authorised by the FSA, a special case fee will be charged (see DISP 5 (Financial Ombudsman Service Funding Rules)) and this will be recoverable as a debt to FOS Ltd in the same way as case fees relating to complaints about firms.

01/04/2002

DISP App 1.13

Time limits, record keeping and reporting requirements

01/12/2004

DISP App 1.13.1

The time limits, record keeping and reporting requirements in DISP 1.4 (Time limits for dealing with a complaint) and DISP 1.5 (Record keeping and reporting) do not apply to firms in respect of relevant existing complaints since these, by definition, will already have been referred to a former scheme.

01/04/2002

DISP App 1.14

Cooperation with the Ombudsman

01/12/2004

DISP App 1.14.1

Firms must comply with DISP 1.6 (Cooperation by firms with the Ombudsman) in respect of relevant existing complaints.

01/04/2002

DISP App 2

Handling
Mortgage Endowment Complaints

DISP App 2.1

Introduction

01/12/2004

DISP App 2.1.1

This appendix sets out the approach and standards which firms should use when investigating complaints relating to the sale of endowment policies for the purposes of achieving capital repayment of a mortgage. It is not intended to be comprehensive. It is primarily concerned with the assessment of whether the complainant may have suffered financial loss, and if so, how much that loss is, and therefore what amount a firm should consider offering by way of fair and appropriate compensation in circumstances where the firm's investigation of a complaint reveals:

(1) the complainant has received negligent advice on investments; and

(2) if this advice had not been negligent, either:

(a) the complainant would be unlikely to have acquired the endowment policy but instead would have taken out the same amount of loan on a repayment basis; or

(b) the complainant would have acquired an endowment mortgage for a shorter term.

01/04/2002

DISP App 2.1.2

There will also be cases where a firm will conclude after investigation that, notwithstanding its own failure to give compliant and proper advice, the complainant would nevertheless have proceeded with the endowment policy as sold, in which case no compensation will be due.

01/04/2002

DISP App 2.1.3

This appendix only addresses how firms should approach the assessment of loss and compensation where negligence on the part of the firm is established.

01/04/2002

DISP App 2.1.4

This appendix is relevant both to the obligations arising under the complaints handling rules contained in DISP 1.2 and to the FSA's approach to the supervision of firms.

01/04/2002

DISP App 2.1.5

This appendix is also relevant to complaints which the Ombudsman may investigate under the Compulsory Jurisdiction or Voluntary Jurisdiction of the Financial Ombudsman Service established under Part XVI of the Act (The Ombudsman Scheme).

01/04/2002

DISP App 2.1.6

Before proceeding to assess the extent of a complainant's financial loss, a firm will usually have completed the following stages:

(1) gathering all relevant facts and information;

(2) making a fair and objective assessment whether it has failed to comply with a relevant duty owed to the complainant; and

(3) assessing whether any failure of duty by it was in the circumstances a material failure in the sense that if it had not occurred the complainant would have been likely to have acted differently.

01/04/2002

DISP App 2.1.7

If it is concluded that the complainant would have acted differently, the firm should proceed to assess any direct or consequential loss.

01/04/2002

DISP App 2.1.8

Nothing in this appendix relieves firms of the obligation to consider the particular facts and circumstances of each complaint and to consider whether the assessment of loss and compensation should, in the light of those facts and circumstances, be carried out on a different basis. If, however, the facts and circumstances make it appropriate to do so, the FSA's expectation is that firms will apply the approach and standards set out in this appendix, and where they do not, the FSA is likely to require them to demonstrate the adequacy and completeness of their alternative approach.

01/04/2002

DISP App 2.2

The standard approach to redress

01/12/2004

DISP App 2.2.1

If there has been a failure to give compliant and proper advice, or some other breach of the duty of care, the basic objective of redress is to put the complainant, so far as is possible, in the position he would have been in if the inappropriate advice had not been given, or the other breach had not occurred. In many cases, although it must be a matter for inquiry and assessment in each individual case, this position is likely to have resulted in the complainant taking a repayment mortgage with accompanying life cover, and this is the assumption which underpins the standard approach to redress.

01/04/2002

DISP App 2.2.2

Unless the contrary is demonstrated, it should be assumed that the complainant could have afforded the mortgage on a repayment basis.

01/04/2002

DISP App 2.2.3

The measure of any financial loss suffered by the complainant will be arrived at by:

(1) comparing the complainant's current capital position with the position he would have been in had the loan been a standard repayment mortgage as at the date the firm decides to regard the complaint as justified; and

(2) comparing the cost of the complainant's actual monthly outgoings and those he would have made had his loan been on a standard repayment basis as at the date the firm decides to regard the complaint as justified.

01/04/2002

DISP App 2.2.4

In some cases other factors may be included in the overall calculation, for example, if mortgage arrangement fees were waived by agreement on the occasion of the endowment policy being taken out.

01/04/2002

DISP App 2.2.5

If, on comparing the complainant's current endowment position with the repayment alternative, the surrender value of the endowment policy exceeds the amount of the capital which the complainant would have repaid through the repayment method, then, at the point of the assessment, the complainant has suffered no capital loss (but the complainant may suffer some compensatable consequential loss associated with changing the mortgage arrangements to the repayment basis, see DISP App 2.3). Conversely, if the capital which would have been repaid on the repayment basis exceeds the surrender value, there is a capital loss represented by the difference between the two amounts.

01/04/2002

DISP App 2.2.6

If the complainant's endowment mortgage outgoings exceed the equivalent cost for the repayment method, the complainant should be compensated for the higher payments in addition to any loss on the surrender value and capital repaid comparison. This means, for example, that if the endowment arrangement has been more expensive, this may result in compensatable loss even though the capital repayment against surrender comparison may be favourable to the endowment.

01/04/2002

DISP App 2.2.7

If the total cost of the outgoings for the endowment calculation is less than that for the repayment calculation, the "savings" should be brought into account in assessing any overall loss unless it is unreasonable to do so.

01/04/2002

DISP App 2.2.8

It is unlikely to be reasonable to bring "savings" into account in circumstances where, at the time of the sale of the policy:

(1) the complainant was advised or informed orally or in writing that he would have lower outgoings than would be the case under a repayment mortgage, whether or not the difference was quantified; and

(2) the complainant has dissipated those "savings" on the strength of this advice or information.

01/04/2002

DISP App 2.2.9

The circumstances in which it may be appropriate to take some or all of the "savings" into account are those where, subject to DISP App 2.2.7 G, the complainant is of "sufficient means" so that it is reasonable for a firm to assume that the "savings" have contributed to those means.

01/04/2002

DISP App 2.2.10

Where it is otherwise reasonable for "savings" to be brought into account, determining whether or not a complainant is of sufficient means and, if so, to what extent the "savings" are to be brought into account, will have to be based on the facts of each individual case. It will be appropriate to require the complainant to provide adequate information to assist the firm in this task. Matters to be taken into account in this assessment may include:

(1) the length of the remaining mortgage term;

(2) the complainant's current and prospective resources;

(3) the amount of the capital shortfall in proportion to the endowment outgoings balance.

01/04/2002

DISP App 2.2.11

Firms may adopt streamlined processes to assist them in individual assessments of "sufficient means", but will have to satisfy themselves that the complainant's position is nevertheless protected. Firms will need to ensure that the complainant is given an opportunity to make an informed choice whether to accept the streamlined process, that the process itself is transparent, and that the firm is satisfied that the outcome would be fair to complainants.

01/04/2002

DISP App 2.2.12

If a firm intends to make a deduction for all or any part of the lower endowment outgoings, the firm should explain clearly to the complainant in writing both how the 'sufficient means' test has been satisfied, including details of the information taken into account in reaching the decision, and how the deduction has been arrived at. The letter should further inform the complainant that if he is unhappy with the proposal to make a deduction, either in principle or as to the amount, he should give his reasons to the firm.

01/04/2002

DISP App 2.2.13

If a complainant puts forward a case that it would be unreasonable for a deduction to be made, the firm should reach a fair and objective determination on the facts of all relevant matters including those set out at DISP App 2.2.8 G and DISP App 2.2.9 G.

01/04/2002

DISP App 2.2.14

In recognition that firms may not wish, for practical reasons, to make individual assessments of "sufficient means", firms may decide not to seek to bring into account any benefit to the complainant in assessing overall compensation.

01/04/2002

DISP App 2.2.15

It would not be unreasonable if a firm providing redress in these circumstances were to frame its offer of redress on the assumption that the complainant will agree to surrender the policy. However, firms should bear in mind that there may be circumstances where it is appropriate for the complainant to retain the policy, for example, where it is being retained as a savings vehicle.

01/04/2002

DISP App 2.2.16

If a complainant becomes aware that he has taken out the endowment policy on the basis of unsuitable advice and inadequate information, he should if necessary, after taking appropriate advice, take reasonable steps to limit his loss, and may in any subsequent claim be unable to recover for losses which are avoidable. The complainant may have to show that he has not delayed unreasonably since becoming aware of his loss. The reasonable costs and expenses the complainant may have incurred in limiting his loss are to be taken into account in assessing his compensation. These costs and expenses are likely to include the complainant taking advice on whether he should convert from an endowment to a repayment mortgage and incurring expenses in doing so, see DISP App 2.3.

01/04/2002

DISP App 2.2.17

The standard approach to redress can be illustrated by the following examples, which show how redress would be calculated in certain hypothetical but typical scenarios. (Because the examples are illustrative, round numbers have been used for 'established facts' in each example. The payments should be taken as being made monthly: firms should not approximate by assuming that payments are made annually. If the complainant has benefited from MIRAS, the calculations should allow for the effect of MIRAS both on the endowment mortgage and the repayment comparison.)

01/04/2002

DISP App 2.2.18

Table of examples of typical redress calculations

Example 1

Capital shortfall and higher endowment outgoings

Example 2

Capital shortfall partially offset by lower endowment mortgage outgoings

Example 3

Capital shortfall more than offset by lower endowment mortgage outgoings

Example 4

Capital surplus more than offset by higher endowment mortgage outgoings

Example 5

Capital surplus partially offset by higher endowment mortgage outgoings

Example 6

Capital surplus and lower endowment mortgage outgoings

Example 7

Low start endowment mortgage

01/04/2002

DISP App 2.2.19

Example 1

Capital shortfall and higher endowment mortgage outgoings

Background

Capital sum of £50,000

25 year endowment policy

Duration to date: 5 years

Endowment premium per month: £75

Established facts

Endowment surrender value:

£3,200

Capital repaid under equivalent repayment mortgage:

£4,200

Surrender value less capital repaid:

(£1,000)

Cost of converting from endowment mortgage to repayment mortgage:

(£200)

Total outgoings to date

Equivalent repayment mortgage (capital + interest + DTA life cover):

£21,950

Endowment mortgage (endowment premium + interest):

£22,250

Difference in outgoings (repayment - endowment):

(£300)

Basis of compensation

In this example, the complainant has suffered loss because the surrender value of the endowment is less than the capital repaid and also because of the higher total outgoings to date of the endowment mortgage relative to the repayment mortgage. The two losses and the conversion cost are therefore added together in order to calculate the redress.

Redress

Loss from surrender value less capital repaid:

(£1,000)

Loss from total extra outgoings under endowment mortgage:

(£300)

Cost of converting to repayment mortgage:

(£200)

Total loss:

(£1,500)

Therefore total redress is:

£1,500

01/04/2002

DISP App 2.2.20

Example 2

Capital shortfall partially offset by lower endowment mortgage outgoings

Background

Capital sum of £50,000

25 year endowment policy

Duration to date: 5 years

Endowment premium per month: £60

Established facts

Endowment surrender value:

£2,500

Capital repaid under equivalent repayment mortgage

£4,200

Surrender value less capital repaid under equivalent repayment mortgage:

(£1,700)

Cost of converting from endowment mortgage to repayment mortgage

(£300)

Total outgoings to date:

Repayment mortgage (capital + interest + DTA life cover):

£21,950

Endowment mortgage (endowment premium + interest):

£21,350

Difference in outgoings (repayment - endowment):

£600

Basis of Compensation

In this example, the complainant has suffered loss because the surrender value of the endowment is less than the capital repaid but has gained form the lower outgoings of the endowment mortgage to date. In calculating the redress the gain may be offset against the loss unless the complainant's particular circumstances are such that it would be unreasonable to take account of the gain.

Redress if it is not unreasonable to take account of the whole of the gain from lower outgoings

Loss from surrender value less capital repaid:

(£1,700)

Gain from total lower outgoings under endowment mortgage:

£600

Cost of converting to repayment mortgage:

(£300)

Net loss:

(£1,400)

Therefore total redress is:

£1,400

Redress if it is unreasonable to take account of gain from lower outgoings

Loss from surrender value less capital repaid:

(£1,700)

Gain from total lower outgoings under endowment mortgage:

Ignored*

Cost of converting to repayment mortgage:

(£300)

Net loss taken into account:

(£2,000)

Therefore total redress is:

£2,000

* In this example, and also in Examples 3, 7, 8 and 9, the complainant's circumstances are assumed to be such as to make it unreasonable to take account of any of the gain from lower outgoings.

01/04/2002

DISP App 2.2.21

Example 3

Capital shortfall more than offset by lower endowment mortgage outgoings

Background

Capital sum of £50,000

25 year endowment policy

Duration to date: 8 years

Endowment premium per month: £65

Established facts

Endowment surrender value:

£7,300

Capital repaid under equivalent repayment mortgage:

£7,600

Surrender value less capital repaid:

(£300)

Cost of converting from endowment mortgage to repayment mortgage:

(£200)

Total outgoings to date

Repayment mortgage (capital + interest + DTA life cover):

£34,510

Endowment mortgage (endowment premium + interest):

£33,990

Difference in outgoings (repayment - endowment):

£520

Basis of Compensation

Redress if it is not unreasonable to take account of the whole of the gain from lower outgoings

Loss from surrender value less capital repaid:

(£300)

Gain from total lower outgoings under endowment mortgage:

£520

Cost of converting to repayment mortgage:

(£200)

Net gain:

£20

Therefore, there has been no loss and no redress is payable.

Redress if it is unreasonable to take account of gain from lower outgoings

Loss from surrender value less capital repaid:

(£300)

Gain from total lower outgoings under endowment mortgage:

Ignored

Cost of converting to repayment mortgage:

(£200)

Net loss taken into account:

(£500)

Therefore total redress is:

£500

01/04/2002

DISP App 2.2.22

Example 4

Capital surplus more than offset by higher endowment mortgage outgoings

Background

Capital sum of £50,000

25 year endowment policy

Duration to date: 8 years

Endowment premium per month: £75

Established facts

Endowment surrender value:

£7,800

Capital repaid under equivalent repayment mortgage:

£7,600

Surrender value less capital repaid:

£200

Cost of converting from endowment mortgage to repayment mortgage:

(£250)

Total outgoings to date

Repayment mortgage (capital + interest + DTA life cover):

£34,510

Endowment mortgage (endowment premium + interest):

£34,950

Difference in outgoings (repayment - endowment):

(£440)

Basis of compensation

In this example, the complainant has suffered loss because of the higher total outgoings to date of the endowment mortgage but has gained because the surrender value of the endowment is greater than the capital repaid. Since the sum of the loss and the conversion cost is greater than the gain, the redress is calculated as the difference between the two.

Redress

Gain from surrender value less capital repaid:

£200

Loss from total extra outgoings under endowment mortgage:

(£440)

Cost of converting to repayment mortgage:

(£250)

Net loss:

(£490)

Therefore total redress is:

£490

01/04/2002

DISP App 2.2.23

Example 5

Capital surplus partially offset by higher endowment mortgage outgoings

Background

Capital sum of £50,000

25 year endowment policy

Duration to date: 10 years

Endowment premium per month: £75

Established facts

Endowment surrender value:

£11,800

Capital repaid under equivalent repayment mortgage:

£9,700

Surrender value less capital repaid:

£2,100

Cost of converting from endowment mortgage to repayment mortgage:

(£300)

Total outgoings to date

Repayment mortgage (capital + interest + DTA life cover):

£46,800

Endowment mortgage (endowment premium + interest):

£47,500

Difference in outgoings (repayment - endowment):

(£700)

Basis of compensation

In this example, the complainant has suffered loss because of the higher total outgoings to date of the endowment mortgage relative to the repayment mortgage. However the sum of this and the conversion cost is less than the complainant's gain from the difference between the surrender value of the endowment and the capital repaid. Thus no redress is payable.

Redress

Gain from surrender value less capital repaid:

£2,100

Loss from total extra outgoings under endowment mortgage:

(£700)

Cost of converting to repayment mortgage:

(£300)

Net gain:

£1,100

Therefore there has been no loss and no redress is payable.

01/04/2002

DISP App 2.2.24

Example 6

Capital surplus and lower endowment mortgage outgoings

Background

Capital sum of £50,000

25 year endowment policy

Duration to date: 10 years

Endowment premium per month: £65

Established facts

Endowment surrender value:

£10,100

Capital repaid under equivalent repayment mortgage:

£9,700

Surrender value less capital repaid:

£400

Cost of converting from endowment mortgage to repayment mortgage:

(£200)

Total outgoings to date

Repayment mortgage (capital + interest + DTA life cover):

£46,800

Endowment mortgage (endowment premium + interest):

£46,300

Difference in outgoings (repayment - endowment):

£500

Basis of compensation

In this example, the complainant has gained both because the surrender value of the endowment is greater than the capital repaid and because of the lower total outgoings of the endowment mortgage. These gains are larger than the cost of converting to a repayment mortgage. Thus no further action is necessary.

Redress

As there has been no loss, no redress is payable.

01/04/2002

DISP App 2.2.25

Example 7

Low start endowment mortgage

Background

Capital sum of £50,000

25 year endowment policy

Duration to date: 10 years

Endowment premium per month: starting at £35 in first year, increasing by 20% simple on each policy anniversary, reaching £70 after five years and then remaining at that level.

Established facts:

Endowment surrender value:

£8,200

Capital repaid under equivalent repayment mortgage::

£9,700

Surrender value less capital repaid:

(£1,500)

Cost of converting from endowment mortgage to repayment mortgage:

(£250)

Total outgoings to date

Repayment mortgage (capital + interest + DTA life cover):

£46,800

Endowment mortgage (endowment premium + interest):

£45,640

Difference in outgoings (repayment minus endowment):

£1,160

Of this difference in outgoings, £800 arose in the five year period when the complainant was paying a low endowment premium.

Basis of compensation

In this example, the complainant has suffered loss because the surrender value of the endowment is less than the capital repaid but has gained from the lower total outgoings of the endowment mortgage. As in Example 3, in calculating redress the whole of the gain should be offset against the loss unless the complainant's particular circumstances are such that it would be unreasonable to do so. However, unlike Example 3, in a low start endowment mortgage the complainant may have chosen to pay a lower than usual premium in the early years (this would need to be established on the facts of the case). Where it has been established that the complainant chose to make lower payments, even if it is unreasonable to take account of the whole of the gain from total outgoings, the gain from paying a lower premium during the low start period is normally taken into account. In such cases the redress is calculated as the capital loss plus the conversion cost minus the total amount by which repayment mortgage outgoings would have exceeded the actual low start endowment mortgage outgoings during the five year low start period.

Redress if it is not unreasonable to take account of the whole of the gain from lower outgoings

Loss from surrender value less capital repaid:

(£1,500)

Gain from total lower outgoings under endowment mortgage:

£1,160

Cost of converting to repayment mortgage:

(£250)

Net loss:

(£590)

Therefore total redress is:

£590

Redress if it is unreasonable to take account of gain from lower outgoings

Loss from surrender value less capital repaid:

(£1,500)

Gain from total lower outgoings during low start period of endowment mortgage:

£800

Cost of converting to repayment mortgage:

(£250)

Net loss taken into account:

(£950)

Therefore total redress is:

£950

01/04/2002

Interest rates

DISP App 2.2.26

In fixing a repayment comparator, it would be appropriate to have regard to the repayment quotation actually provided at the time of sale. If more than one repayment quotation was obtained, the comparison should be with the quotation which approximates most closely to the terms of the endowment mortgage actually taken. If a repayment quotation was not provided, or is not now available, it should be assumed that the interest rate for the repayment comparison is the same as that of the mortgage endowment arrangements. Firms will then need to replicate interest rate changes throughout the lifetime of the comparator mortgage.

01/04/2002

Life cover

DISP App 2.2.27

Unless after due inquiry there is clear evidence that the complainant with a mortgage endowment had no foreseeable need for life cover at the time the endowment arrangements were concluded, in the overall comparison between a repayment mortgage and an endowment mortgage the monthly outgoings under the repayment will include the premium for the decreasing term assurance that would have been required. This adjustment for the cost of life cover is only to be made if the firm is undertaking a comparison of monthly outgoings. It is not appropriate to deduct the cost of life cover from the capital loss calculation, as this would constitute double counting.

01/04/2002

DISP App 2.2.28

If a deduction is to be attributed to the provision of life cover, the appropriate approach is to assume that the complainant took out the insurance quoted in the alternative repayment quotation provided at the time of the sale. If the quotation is not available, the deduction should be at the rates that would have been quoted at the time.

01/04/2002

DISP App 2.3

Remortgaging

01/12/2004

DISP App 2.3.1

As already noted, the basic objective of redress is to put the complainant, so far as is possible, in the position he would have been in if the inappropriate advice or other breach had not occurred: for their part, the complainants should take such reasonable steps as they can to limit loss once they are informed of the position they are in because of the failure of advice at the time of sale.

01/04/2002

DISP App 2.3.2

In practice, it is likely to be appropriate for a complainant whose complaint has been upheld to convert to a repayment mortgage, whether or not there is financial loss to date. It will normally be possible for complainants to do so without incurring unreasonable cost. Conversion will of course mean that the complainant no longer has a policy.

01/04/2002

DISP App 2.3.3

Firms should therefore in the case of upheld complaints inform complainants that it is likely to be appropriate and necessary for them to convert to a repayment arrangement.

01/04/2002

DISP App 2.3.4

Firms should make it clear that they will bear the costs of conversion if the rearrangement is made with the existing lender and to the equivalent repayment mortgage. If a complainant is not willing to rearrange with the existing lender, then the costs to be paid by the firm should normally be limited to those which would have been payable had the rearrangement been made with the existing lender and to the equivalent repayment mortgage. If it is not possible to rearrange with the existing lender, for example, if the lender has a closed book, the firm should pay all costs which are not unreasonable in completing the rearrangement with an alternative provider. Such costs might include an administration fee for changing the existing arrangement, redemption penalty, arrangement fee for the new mortgage and the reasonable cost of further advice if necessary.

01/04/2002

DISP App 2.3.5

If the "new" mortgage is, in fact, arranged at a lower interest rate than the existing loan, the benefit to the complainant should usually be disregarded, as it is always open to complainants to change their underlying mortgage arrangements at any time.

01/04/2002

DISP App 2.3.6

If the "new" mortgage is arranged at a higher interest rate than the existing loan, the increased payment should not normally be taken into account in calculating any payment to be made to the complainant.

01/04/2002

DISP App 2.3.7

If the complainant takes the opportunity to increase his loan on the occasion of the remortgage, the expenses which a firm pays by way of compensation should be paid by reference to the capital sum due under the "old" loan.

01/04/2002

DISP App 2.3.8

As stated, one aspect of the conversion process is the disposal of the endowment policy. The standard approach to assessing loss requires firms to calculate loss using the surrender value. However, once loss is established on this basis and firms move to deal with redress, they may wish to consider whether there is a role for the policy's 'market value' within the traded endowment policy (TEP) market.

01/04/2002

DISP App 2.3.9

A firm may arrange the sale of the endowment policy on the traded endowment market, provided the full implications of such a course of action are explained to the complainant and his express consent is obtained for the firm to arrange the sale. This includes informing the investor that he will continue to be the life assured under the policy. The complainant should be informed that such an arrangement may reduce or eliminate the amount of redress actually borne by the firm, but not so as to affect the amount of redress he receives.

01/04/2002

DISP App 2.3.10

In the event that a complainant is willing to pursue this option, a firm should first have assessed the complainant's loss using the approach set out in this appendix, and the minimum amount the complainant should receive under such a sale arrangement is the sum representing the position the complainant should have been in under this appendix together with the reimbursement of remortgaging costs. In order to ensure the process does not delay the provision of redress, the firm must pay this minimum sum immediately the complainant agrees to the sale arrangement. To the extent that the net amount realised by the sale of the policy on the traded endowment market exceeds the total redress due to the complainant, this greater sum is to be paid to the complainant on completion of the sale. If the amount realised by the sale of the policy on the traded endowment market is less than the total redress due to the complainant, the firm will be responsible for the amount of the shortfall.

01/04/2002

DISP App 2.3.11

Example of assessment set out at 2.3.10

The following example illustrates the position:

Surrender value

£10,000

TEP value

£16,000

Loss calculated by standard approach

£5,000

Remortgaging costs

£300

Total

£15,300

Complainant receives £16,000 all ultimately funded from the TEP sale.

Surrender value

£10,000

TEP value

£13,000

Redress calculated by standard approach

£5,000

Remortgaging costs

£300

Total

£15,300

Complainant receives £15,300, £13,000 ultimately funded from the TEP sale and £2,300 ultimately funded from the firm.

01/04/2002

DISP App 2.4

Policy reconstruction

01/12/2004

DISP App 2.4.1

This section of this appendix is primarily concerned with circumstances where the term of the mortgage and associated endowment policy extend beyond the individual complainant's normal retirement age in circumstances where the firm regards a complaint as justified because the arrangement is not affordable in retirement; and this could have, and should have, been foreseen at the time of the advice.

01/04/2002

DISP App 2.4.2

Two sets of circumstances are examined at DISP App 2.4.3 G to DISP App 2.4.13 G. Although these are considered in isolation, firms should, as part of their investigation of all of the factors involved in the complaint, consider whether either set of circumstances should be considered in conjunction with those factors examined at DISP App 2.2.

01/04/2002

Case 1

DISP App 2.4.3

If on enquiry it is found that no proper assessment of the complainant's post-retirement means had been undertaken at the time of sale, but if the likelihood had been that the complainant would have borrowed the same amount over a shorter term (up to retirement) using an endowment policy as a repayment vehicle, then an appropriate form of redress would be for the policy to be reconstructed with a shorter term.

01/04/2002

DISP App 2.4.4

Redress should in most cases be provided by meeting the cost of rearranging the policy, by way of a lump sum payment into the policy in respect of the higher rate of premium due from its inception. It may be appropriate in individual cases to take account of the lower premiums that the complainant will have paid to date. The guidance in DISP App 2.2, as to the circumstances in which this will be appropriate, will be relevant here.

01/04/2002

DISP App 2.4.5

If the policy extends beyond retirement age and the complainant is already retired, the policy should be reconstructed to a maturity date as at the accepted retirement date, with the policy proceeds becoming immediately payable. The costs are to be borne by the firm, subject to any lower outgoings adjustment.

01/04/2002

DISP App 2.4.6

Firms should consider whether the reconstruction would have tax implications for complainants (see DISP App 2.5.8 G and DISP App 2.5.9 G).

01/04/2002

DISP App 2.4.7

The reconstruction process deals with the situation to the date the policy is reconstructed. The complainant will generally be responsible for paying the increased premiums for the remaining term.

01/04/2002

DISP App 2.4.8

At the time the complainant is advised of the revised premium, he should as a matter of good practice be provided with a reprojection based on the prevailing projection rates, which will allow him to address any projected shortfall.

01/04/2002

DISP App 2.4.9

If it is not possible for a firm to reconstruct a policy, then it should offer the investor equivalent redress, for example, by paying a cash lump sum equivalent to the amount that would have been credited to a reconstructed policy.

01/04/2002

Case 2

DISP App 2.4.10

If a loan extending into retirement was on any basis not affordable, whether or not it is reconstructed to the retirement date, firms will need to consider whether, if proper advice had been given, the loan would have been taken out at all and, if not, consider what arrangements might now need to be made in order to reduce the amount of the complainant's borrowings.

01/04/2002

Mismatched loans and policy terms

DISP App 2.4.11

If a complaint is regarded as justified by the firm on the basis that the endowment policy maturity date extends beyond the mortgage term expiry date and the firm is responsible for this situation, the policy should be reconstructed so that it matures at the expiry of the mortgage term.

01/04/2002

DISP App 2.4.12

In these circumstances the guidance given elsewhere in DISP App 2.4 will apply as appropriate.

01/04/2002

Examples

DISP App 2.4.13

The following examples illustrate the approach to redress as described in this section.

01/04/2002

DISP App 2.4.14

Example 8

Term extends beyond retirement age and policy reconstruction

Background

45 year old male non-smoker, having taken out a £50,000 loan in 1998 for a term of 25 years. Unsuitable sale identified on the grounds of affordability and complaint raised on 12^thpolicy anniversary.

It has always been the intention of the complainant to retire at State retirement age 65.

Term from date of sale to retirement is 20 years and the maturity date of the mortgage is 5 years after retirement.

Established facts

Established premium paid by investor on policy of original term (25 years):

£81.20

Premium that would have been payable on policy with term from sale to retirement (20 years):

£111.20

Actual policy value at time complaint assessed:

£12,500

Value of an equivalent 20-year policy at time complaint assessed:

£21,300

Difference in policy values at time complaint assessed:

£8,800

Difference in outgoings (20 year policy - 25 year policy):

£4,320

Basis of compensation

The policy is reconstructed as if it had been set up originally on a term to mature at retirement age, in this example, a term of 20 years. The difference in the current value of the policy actually sold to the complainant and the current value of the reconstructed policy, as if the premium on the reconstructed policy had been paid from outset, is calculated. The complainant has gained from lower outgoings (lower premiums) of the actual endowment policy to date. In calculating the redress, the gain may be offset against the loss unless the complainant's particular circumstances are such that it would be unreasonable to take account of the gain.

Redress generally if it is not unreasonable to take account of the whole of the gain from lower outgoings

Loss from current value of reconstructed policy less current value of actual policy:

(£8,800)

Gain from total lower outgoings under actual policy:

£4,320

Net loss:

(£4,480)

Therefore total redress is:

£4,480

Redress if it is unreasonable to take account of gain from lower outgoings

Loss from current value of reconstructed policy less current value of actual policy:

(£8,800)

Gain from total lower outgoings under actual policy:

Ignored

Therefore total redress is:

£8,800

Additional Information

If the policy is capable of reconstruction, the complainant must now fund the higher premiums himself for the remainder of the term of the shortened policy until maturity. In this example the higher premium could be £111.20. However the firm should provide the complainant with a reprojection letter based on the reconstructed policy such that the actual monthly payment required to achieve the target sum could be even higher, say £130. The reprojection letter should set out the range of options facing the complainant to deal with the projected shortfall, if any.

01/04/2002

DISP App 2.4.15

Example 9

Term extends beyond retirement age: example of failure to explain investment risks

Background

45 year old male non-smoker, having taken out a £50,000 loan in 1998 for a term of 25 years. Unsuitable sale identified on the grounds of affordability and complaint raised on 12th anniversary.

It has always been the intention of the complainant to retire at state retirement age 65.

Term from date of sale to retirement is 20 years and the maturity date of the mortgage is five years after retirement.

In addition, an endowment does not meet the complainant's attitude to investment risk and a repayment mortgage would have been taken out if properly advised.

Established facts

Surrender value (on the 25 year policy) at time complaint assessed:

£12,500

Capital repaid under repayment mortgage of term to retirement date (20 years):

£21,000

Surrender value less capital repaid:

(£8,500)

Difference in outgoings (repayment - endowment):

£5,400

Cost of converting from endowment mortgage to repayment mortgage:

£200

Basis of compensation:

The surrender value of the (25 year term) endowment policy is compared to the capital that would have been repaid to date under a repayment mortgage arranged to repay the loan at retirement age, in this example, a repayment mortgage for a term of 20 years. The complainant has gained from lower outgoings of the endowment mortgage to date. In calculating the redress, the gain may be offset against the loss unless the complainant's particular circumstances are such that it would be unreasonable to take account of the gain. The conversion costs are also taken into account in calculating the redress.

Redress generally

Loss from surrender value less capital repaid:

(£8,500)

Gain from total lower outgoings under endowment mortgage:

£5,400

Cost of converting to a repayment mortgage:

(£200)

Net loss:

(£3,300)

Therefore total redress is:

£3,300

Redress if it is unreasonable to take account of gain from lower outgoings

Loss from surrender value less capital repaid:

(£8,500)

Gain from total lower outgoings under endowment mortgage:

Ignored

Cost of converting to a repayment mortgage:

(£8,700)

Therefore total redress is:

£8,700

01/04/2002

DISP App 2.5

Additional considerations

01/12/2004

Introduction

DISP App 2.5.1

This section addresses issues which may be relevant to the standard redress for unsuitability cases, as well as some post-retirement cases upheld on the grounds of affordability.

01/04/2002

Continuing life cover and other policy benefits

DISP App 2.5.2

Firms will need to consider the importance for many complainants of having life assurance in place to ensure a mortgage is paid off in the event of death.

01/04/2002

DISP App 2.5.3

If a complaint is upheld and the policy is to be surrendered as part of the settlement, the firm should remind the complainant in writing that the life cover within the endowment will be terminated and that it may therefore be appropriate to take advice about the merits or otherwise of taking out a stand-alone life policy in substitution.

01/04/2002

DISP App 2.5.4

If a need for life assurance at inception has been established so that a deduction representing its cost has been made from the redress payable under DISP App 2.2.4 G, the firm should advise the complainant that the firm would be responsible for paying any premium for an appropriate replacement policy which exceeds that used for calculating the deduction or alternatively will, where possible, provide the cover itself at that cost. If it is not possible for the firm to provide the cover itself at the original cost, it may choose to discharge that obligation by the payment of an appropriate lump sum. Any such amount should enable the complainant to effect the cover at the original cost, with no additional cost in respect of increased age or deterioration in health. This option may be particularly relevant if the firm against which the complaint has been made is an independent intermediary which cannot itself provide the cover, although it may be possible for such a firm to arrange for the product provider to offer cover to the complainant at the original premium on payment by the independent intermediary of an appropriate lump sum to meet any increased cost.

01/04/2002

DISP App 2.5.5

Firms will not be responsible for any increased costs resulting from the complainant choosing another product provider or for increased premiums charged by another provider chosen by the complainant in respect of the risk now presented, for example, higher premiums charged by the other provider due to deterioration in health, unless the original product provider no longer writes new business and is unable to offer revised life cover on a decreasing term assurance basis.

01/04/2002

DISP App 2.5.6

There can be exceptional circumstances where, in order to retain suitable life cover, the endowment policy has to be retained and any additional costs will be the responsibility of the firm that sold the endowment policy.

01/04/2002

DISP App 2.5.7

The same considerations will apply to the establishment of the need for other policy benefits including critical illness cover, disability cover and waiver of premium.

01/04/2002

Taxation

DISP App 2.5.8

If, as a result of policies being surrendered or reconstructed, or if any form of underpinning or guarantee is given, there is a potential tax liability for the complainant, it will be appropriate for firms to undertake in writing to the complainant to reimburse any tax payable, or which becomes payable. Firms should make this payment on production of appropriate evidence of the liability and payment having been made.

01/04/2002

"Underpinning"

DISP App 2.5.10

Firms proposing to offer arrangements involving some form of minimum underpinning or 'guarantee' should discuss their proposals with the FSA and HM Revenue and Customs at the earliest possible opportunity (see DISP App 2.5.8 G). The FSA will need to be satisfied that these proposals provide complainants with redress which is at least commensurate with the standard approaches contained in this appendix.

21/04/2005

Reference to the guidance in firms' complaints settlement letters

DISP App 2.5.11

One of the reasons for introducing the guidance in this appendix is to seek a reduction in the number of complaints which are referred to the Financial Ombudsman Service. If a firm writes to the complainant proposing terms for settlement which are in accordance with this appendix, the letter may include a statement that the calculation of loss and redress accords with the FSA guidance, but should not imply that this extends to the assessment of whether or not the complaint should be upheld. Firms should point out that if the complainant remains dissatisfied, he may refer the complaint to the Financial Ombudsman Service.

01/04/2002

DISP App 2.5.12

A statement under DISP App 2.5.11 G should not give the impression that the proposed terms of settlement have been expressly endorsed by either the FSA or the Financial Ombudsman Service.

01/04/2002

Identification of windfall benefits

DISP App 2.5.13

Windfall benefits should be determined in accordance with the principle in Needler Financial Services and Taber ('Needler'). The basic legal principle in Needler is that a windfall benefit is not to be taken into account in determining the amount of an investor's recoverable loss. The following paragraphs explain our views as to how firms may act in accordance with that principle.

01/04/2002

DISP App 2.5.14

A windfall benefit arises where:

(1) there has been a demutualisation, distribution or reattribution of the inherited estate, or other extraordinary corporate event in a long-term insurer; and

(2) the event gave rise to 'relevant benefits', as defined in DISP App 2.5.15 G (below).

01/04/2002

DISP App 2.5.15

'Relevant benefits' are those benefits that fall outside what is required in order that policyholders' reasonable expectations at that point of sale can be fulfilled. (The phrase 'policyholders' reasonable expectations' has technically been superseded. However, the concept now resides within the obligations imposed upon firms by FSA Principle 6 ('...a firm must pay due regard to the interests of its customers and treat them fairly....') Additionally, most of these benefits would have been paid prior to commencement, when policyholders' reasonable expectations would have been a consideration for a long-term insurer.)

01/04/2002

DISP App 2.5.16

The issue of free shares or cash on a demutualisation, and additional bonuses and policy enhancements given by way of incentive to approve a reattribution or distribution of an inherited estate should, unless there is evidence to the contrary, be treated as relevant benefits for the purposes of DISP App 2.5.15 G. Whether additional bonuses and policy enhancements on a demutualisation are relevant benefits should be determined by applying the test in DISP App 2.5.15 G to each benefit.

01/04/2002

DISP App 2.5.17

Firms should review the terms on which proposals were put to policyholders and the reasons given for a corporate event when determining whether a benefit should be treated as a relevant benefit.

01/04/2002

DISP App 2.5.18

Firms should not normally bring windfall benefits which are relevant benefits (as defined in DISP App 2.5.14 G) to account when assessing financial loss and redress. Where a windfall benefit is in the form of a policy augmentation the benefit should be deducted from the overall value of the policy when making this assessment.

01/04/2002

DISP App 2.5.19

A relevant benefit derived from a corporate event may only be brought to account if the firm is able to demonstrate, with written records created at the time of the advice, that:

(1) The firm foresaw the prospect of the event and the benefit;

(2) The firm's advice included a statement recommending the particular policy because of the possibility of the benefit in question; and

(3) The statement was a material factor in the context of the advice and the decision to invest.

01/04/2002

DISP App 2.5.20

If a firm considers that it can meet this requirement, the firm should by letter explain clearly to the complainant the reasons why it proposes that the benefit should not be treated as a windfall and should be taken into account. The firm should provide the complainant with copies of the relevant documents.

01/04/2002

DISP App 2.5.21

The letter should also explain how the proposed value of the benefit has been calculated and should inform the complainant that if he does not accept the proposal to take the benefit into account he may tell the firm, with reasons. The letter should also say that, if he remains dissatisfied with the firm's response, he may refer the matter to the Financial Ombudsman Service.

01/04/2002

DISP App 2.6

Valuing Relevant Benefits

01/12/2004

DISP App 2.6.1

If, exceptionally under the guidance at DISP App 2.5.13 G to DISP App 2.5.21 G, cash or shares derived from a corporate event are to be taken into account when assessing loss and redress, cash should be valued at the amount actually received and shares should be valued at their issue price. In both cases there should be no addition for interest.

01/04/2002

DISP App 2.6.2

When valuing windfall augmentation benefits for the purposes of calculating loss and redress the objective is to exclude all changes arising from the windfall event. The amount of redress payable will then be equal to the amount that would have been payable if the windfall event had never occurred.

01/04/2002

DISP App 2.6.3

A product provider should ensure that the method it adopts for valuing augmentation benefits is consistent with the statements made in the documentation published about the windfall event. Relevant documentation for the purpose of valuing such benefits will include (but is not limited to)-:

(1) Any description of increases in benefits in any circular to policyholders (and any other public information relating to the event);

(2) Any principles of financial management established for the management of the fund after the event;

(3) statements in any appointed actuary report produced for the event;

(4) statements in any independent actuary report produced for the event; and

(5) subsequent statements relating to bonus practice, calculation surrender values, or both.

01/04/2002

DISP App 2.6.4

The method of valuation adopted should treat the complainant fairly overall.

01/04/2002

DISP App 2.6.5

Where an accurate calculation of the value of an augmentation benefit either cannot be made, or would result in disproportionate expense or delay, product providers may adopt a simplified approach or a proxy method for calculating its value.

01/04/2002

DISP App 2.6.6

A simplified approach should treat the complainants fairly overall.

01/04/2002

DISP App 2.6.7

The product provider's appointed actuary should certify that the method adopted by the product provider for calculating the value of an augmentation benefit is in accordance with the guidance in DISP App 2.6.1 G to DISP 2.6.6 G.

01/04/2002

Implementation

DISP App 2.6.8

The principles set out above (in DISP App 2.6.1 G to DISP App 2.6.7 G) should be applied directly to mortgage endowment complaints where the capital loss is calculated by comparing the surrender value of the endowment policy with the capital which would have been repaid using a repayment mortgage.

01/04/2002

DISP App 2.6.9

In most cases where there is a loss, the endowment policy will be surrendered and put towards the cost of setting up a suitable repayment mortgage. Where this is the case, that part of the surrender value relating to the windfall augmentation should be paid as a cash lump sum to the investor or to the investor's order as part of the redress package. Only that part of the surrender value which does not relate to the windfall augmentation should be put towards the cost of setting up a suitable repayment mortgage.

01/04/2002

DISP App 2.6.10

There may be some circumstances in which the policy will not be surrendered (see DISP App 2.2.15 G). In these cases, there is no requirement to pay the value of the windfall augmentation as a cash lump sum since the value of the augmentation will become payable when the policy matures. However, any fund value used in the calculation of redress payable should exclude the value of the windfall augmentation.

01/04/2002

DISP App 2.6.11

Firms are entitled to mitigate losses by making use of the Traded Endowment Policy (TEP) market (see DISP App 2.3.8 G to DISP App 2.3.10 G). This allows firms to sell policies on the TEP market to meet the costs of redress, rather than using the surrender value. Where this method is adopted, firms should pay to the investor, as part of the redress package, a cash lump sum representing that proportion of the policy realised which would have related to the windfall augmentation.

01/04/2002

DISP App 2.6.12

As this windfall amount should be excluded from the fund value used in the calculation of loss and redress it would also be appropriate for this extra payment to be ignored when assessing whether, "the net amount realised by the sale of the policy on the traded endowment market exceeds the total redress due to the complainant..." (DISP App 2.3.10 G).

01/04/2002

DISP App 2.6.13

There may be circumstances in which a policy needs to be reconstructed (see DISP 2.4). In carrying out the required reconstruction, the windfall augmentation should be ignored in both the existing and the revised policy. However, the policyholder's revised policy should be credited with any windfall augmentation which would have applied if the policy had been set up with the revised terms from the original date of advice. This enhancement can be taken into account in assessing a suitable level for future premiums, in line with DISP App 2.4.8 G.

01/04/2002

DISP App 2.6.14

DISP App 2.5.10 G provides firms with the opinion of underpinning benefits. Firms should satisfy the FSA that their proposals provide complainants with a level of redress that is at least commensurate with the standard approaches and, to ensure consistency, windfall augmentations should be excluded when considering whether an underpin will apply. The FSA will take this into account when considering proposals put forward by firms.

01/04/2002

DISP App 2.6.15

Product providers with windfall benefits in the form of policy augmentations should tell:

(1) their own relevant customers (mortgage endowment complainants); and

(2) other firms with such customers (and any other interested parties);

that they have excluded windfall augmentation benefits from values used or to be used for loss and redress. Firms should provide this information to the Financial Services Compensation Scheme when providing them with a value to be used for loss or redress. Should their own relevant customers, other firms with such customers (and any other interested parties) and the Financial Services Compensation Scheme request it, the firm should provide the value of these benefits and a description of the method used to exclude them.

14/01/2005

Transitional Provisions and Schedules

DISP TP 1

Transitional provisions

DISP TP 1.1

Transitional Provisions table

(1)

(2) Material provision to which transitional provision applies

(3)

(4) Transitional provision

(5) Transitional provision: dates in force

(6) Handbook provision: coming into force

DISP 1.2.15 G

Expired

DISP 1.5.4 R - DISP 1.5.7 R

Expired

DISP 1.5.4 R - DISP 1.5.7 R

Expired

DISP App 1

Firms are subject to DISP App 1in relation to relevant existing complaints.

From commencement

Commencement

DISP App 1

The Ombudsman Transitional Order makes special provision for the handling by FOS Ltd of "relevant existing complaints" (that is, complaints which the former schemes have partly completed at commencement). The arrangements for handling these complaints are set out in DISP App 1. (The handling of complaints which firms have partly completed at commencement is described at DISP 1.4.6 R.)

From commencement

Commencement

DISP 2 DISP 3 DISP 5 and DISP App 1

In DISP 2 DISP 3 DISP 5 and DISP App 1references to a "firm" or "firms" include unauthorised persons subject to the Compulsory Jurisdiction in relation to relevant complaints in accordance with the Ombudsman Transitional Order.

From commencement

Commencement

DISP 2 DISP 3 DISP 5 and DISP App 1

Under the Ombudsman Transitional Order, a relevant complaint is subject to the Compulsory Jurisdiction whether or not it is about a firm or an unauthorised person. Unauthorised persons are not subject to DISP 1, but references to "firm" in DISP 2 DISP 3 , DISP 5 and DISP App 1 include unauthorised persons subject to the Compulsory Jurisdiction in relation to relevant complaints, where applicable.

From commencement

Commencement

DISP 2.3.6 R

Nothing in DISP 2.3.6 R affects the position of a complaint which, on 31 May 2004, could not have been considered by the Ombudsman under DISP 2.3.1 R (1)(c); or DISP 2.3.6 R (1)(b) as it then stood.

From 1 June 2004

Amended with effect from 1 June 2004

DISP 2.3.6 R

In the case of a complainant falling within DISP 2.3.6 R as amended by this instrument, (and whose time for referring a complaint under the rules as they stood before amendment has not expired), time will expire in accordance with the amended rule save that if the final date would otherwise be before 30 November 2004 an explanation of the final date will be in conformity with DISP 2.3.6 R(2) , provided it stipulates a final date which is not less than two months from the date on which the explanation is likely to be received by the complainant.

From 1 June 2004

Amended with effect from 1 June 2004

DISP 1 DISP 2 DISP 3 DISP 4 DISP 5 and DISP App 1

In relation to relevant complaints, references in DISP 1, DISP 2, DISP 3, DISP 4, DISP 5 and DISP App 1 to an " eligible complainant " include a person who is to be treated as an eligible complainant in accordance with the Ombudsman Transitional Order and references to a complaint shall be construed accordingly.

From commencement

Commencement

DISP 5.5.1 R

Expired

DISP 1.5.4 R

DISP 1.5.4 R does not apply to a firm with permission to carry on only insurance mediation activity, mortgage mediation activity, or both.

(1) In respect of mortgage mediation activities, 31.10.04 - 31.3.05; (2) in respect of insurance mediation activities, 14.1.05 - 31.3.05.

DISP 1.5.4 R

Where a firm is required under DISP 1.5.4 R to submit information using a report in the format set out in DISP 1 Ann 1R on a half-yearly basis, this must be read as a reference to providing the first and second report in accordance with transitional provision 12R.

From 01.4.05, expiring on 31.3.06

1 April 2005

DISP 1.5.4 R

If transitional provision 11R applies, the firm's first and second report must be provided as follows:

Accounting reference date

Reporting period starts

Reporting period ends

Report to be provided

Between 1 January 2005 and 31 March 2005

1st report: 1 April 2005

6 months after the accounting reference date within 2005

30 business days after period end

2nd report: the day after the end of the 1st reporting period

the accounting reference date within 2006

Between 1 April 2005 and 30 June 2005

1st report: 1 April 2005

6 months after the accounting reference date within 2005

30 business days after period end

2nd report: the day after the end of the 1st reporting period

the accounting reference date within 2006

Between 1 July 2005 and 30 September 2005

1st report: 1 April 2005

the accounting reference date within 2005

30 business days after period end

2nd report: the day following the accounting reference date within 2005

6 months after the accounting reference date within 2005

Between 1 October 2005 and 31 December 2005

1st report: 1 April 2005

the accounting reference date within 2005

30 business days after period end

2nd report: the day following the accounting reference date within 2005

6 months after the accounting reference date within 2005

DISP 1

Where, at the relevant commencement date, a firm is still dealing with a complaint that is capable of being referred to the Financial Ombudsman Service as a relevant transitional complaint:

31 October 2004 (for a complaint to which the MCAS Scheme applied immediately before that date)

31 October 2004

(1)

it may continue to try to resolve the complaint in accordance with the complaints procedures that applied previously; but

14 January 2005 (for a complaint to which the GISC Facility applied immediately before that date)

(2)

it must, within eight weeks of the relevant commencement date, send the complainant a response which satisfies DISP 1.4.5 R , unless DISP 1.4.3A R or DISP 1.4.9 R applies.

DISP TP 13R recognises that where a firm has already received, but only partly completed the handling of, a complaint which is capable of becoming a relevant transitional complaint, it may not always be practicable to handle the complaint in accordance with DISP 1 after the relevant commencement date.

DISP 5.5.1 R

A firm which falls within industry block 16 or 17 needs to provide a statement to the FSA by the end of February 2005 only if it is providing the FSA with a statement of the total amount of relevant business.

31 October 2004 to 28 February 2005 for firms falling in industry block 16
14 January 2005 to 28 February 2005 for firms falling in industry block 17

31 October 2004

DISP 5.5.1 R

In respect of the year 2005/06, the FSA will already have a statement of the total amount of the firm's annual income as part of the firm's application for a Part IV permission or to vary a Part IV permission. There is thus no need for a firm to repeat this information if it decides not to report annual income for relevant business in accordance with DISP TP 15R.

31 October 2004 to 28 February 2005 for firms falling in industry block 16
14 January 2005 to 28 February 2005 for firms falling in industry block 17

31 October 2004

DISP 1.4.18 R - DISP 1.4.20 G

A firm must apply DISP as it applied before amendment by the Depolarisation Instrument to complaints received before 14 January 2005.

From 14 January 2005.

14 January 2005

DISP TP 1.2

Table Fee tariffs for industry blocks

Industry Block

Tariff Base

1-Deposit acceptors

Number of accounts relevant to the activities in DISP 2.6.1 R

2-Firms that undertake insurance activities, subject to prudential regulation only (excluding firms in blocks 13 & 15)

Relevant annual gross premium income

3-Society of Lloyd's

Flat fee

4-Firms that undertake insurance activities, subject to both prudential and conduct of business regulation (long term life insurers)
(excluding firms in block 15)

Relevant adjusted annual gross premium income

5-Fund managers (including those holding client money/assets and not holding client money/assets)

Relevant funds under management

6-Operators, Trustees and Depositaries of collective investment schemes

Flat fee

7-Firms dealing as principal

Number of relevant traders

8-Advisory arrangers, dealers or brokers (holding or controlling client money and/or assets)

Number of relevant approved persons (controlled functions 21, 22, 24, 25, 26)

9-Advisory arrangers, dealers or brokers (not holding or controlling client money and/or assets)

Number of relevant approved persons (controlled functions 21, 22, 24, 25, 26)

10-Corporate finance advisers

Number of relevant approved persons (controlled function 23)

11-Execution-only arrangers, dealers or brokers

Flat fee

12-Advisory only firms

Number of relevant approved persons (controlled functions 21, 22, 24, 25)

13-Cash plan health providers

Flat fee

15-Friendly Societies whose tax-exempt business represents 95% or more of their total relevant business

Flat fee

DISP TP 1.3

The industry blocks in Table 2 are the same as the equivalent activity group set out in part 7 of SUP 20 Annex 1 .

Where the tariff base in the table is defined in similar terms as the tariff base for the equivalent activity group set out in part 7 of SUP 20 Annex 1 , it must be calculated in the same way as that tariff base except that it takes into account only the firm's relevant business.

01/04/2005

DISP Sch 1

Record keeping requirements

01/12/2004

DISP Sch 1.1

The aim of the guidance in the following table is to give the reader a quick overall view of the relevant record keeping requirements.

It is not a complete statement of those requirements and should not be relied on as if it were.

01/12/2004

DISP Sch 1.2

Handbook reference

Subject of record

Contents of record

When record must be made

Retention period

DISP 1.5.1 R

Complaints subject to DISP 1.4 - DISP 1.1.6 G.

Not specified, but see DISP 1.5.2 G

On receipt

3 years

01/12/2004

DISP Sch 2

Notification requirements

01/12/2004

DISP Sch 2.1

The aim of the guidance in the following table is to give the reader a quick overall view of the relevant requirements for notification and reporting.

It is not a complete statement of those requirements and should not be relied on as if it were.

01/04/2002

DISP Sch 2.1

Handbook reference

Matter to be notified

Contents of notification

Trigger event

Time allowed

DISP 1.1.7 R

Firm qualifies for exemption

Confirmation that a firm does not do business with eligible complainants and has no reasonable likelihood of doing so

Conditions in DISP 1.1.7 R apply

N/A

DISP 1.1.10 R

End of exemption

Confirmation that the conditions in DISP 1.1.7 no longer apply

Conditions in DISP 1.1.7 no longer apply

As soon as reasonably practicable

DISP 1.5.4 R

Complaints report

Details

- 6 months preceding the accounting reference date
- accounting reference date

30 business days

DISP 1.5.11 R

Single contact point

Details

At the time of authorisation or on subsequent change

Not specified

DISP 1.7.5 R

Member of Lloyd's qualifies for exemption

Confirmation by the Society of Lloyd's that a specified member of Lloyd's does not do business with eligible complainants and has no reasonable likelihood of doing so

[As above]

N/A

DISP 1.7.6 R

End of exemption for member of Lloyd's

Confirmation by the Society of Lloyd's that the condition in DISP 1.1.7 no longer apply to a specified member of Lloyd's

Conditions in DISP 1.1.7 no longer apply

Not specified

DISP 1.7.7 R

Complaints report by Society of Lloyd's

Details

- 30 September
- 31 March
each year

One month

DISP 5.5.1 R

Relevant business conducted

The total amount of relevant business (measured in accordance with the appropriate tariff base(s)) which the firm conducted as at or in the year to 31 December as appropriate, in relation to the tariff base for each of the relevant industry blocks set out in DISP 5 Annex 1

N/A

By the end of February each year

01/04/2005

DISP Sch 3

Fees and other required payment

01/12/2004

DISP Sch 3.1

The aim of the guidance in the following table is to give the reader a quick overall view of the relevant requirements for fees and other required payments.

It is not a complete statement of those requirements and should not be relied on as if it were.

01/04/2002

DISP Sch 3.2

Type of fee

Trigger event

Date/Time for payment

Amount/rate

Handbook reference

General levy

Annual invoice from FOS Ltd

(1) On or before the later of 1 April and 30 calendar days after the date when the invoice is issued by FOS Ltd; or
(2) for amounts exceeding the minimum levy, quarterly, at the beginning of each quarter, by direct debit.

Amount of relevant business according to applicable tariff base; or minimum levy.

DISP 5.4
DISP 5.8
Part 2 of DISP 5 Annex 1

Supplementary levy

Annual invoice from FOS Ltd

Amount of relevant business according to applicable tariff base; or minimum levy.

DISP 5.7
DISP 5.8
Part 2 of DISP 5 Annex 1

Case fees

Monthly invoice from FOS Ltd

Within 30 calendar days of date when the invoice is issued by FOS Ltd

Standard case fee (£360) or special case fee (£720), as applicable

DISP 5.6
DISP 5.8
Part 3 of DISP 5 Annex 1

01/04/2002

DISP Sch 4

Powers Exercised

01/12/2004

DISP Sch 4.1

The following powers and related provisions in the Act and in the Ombudsman Transitional Order have been exercised by the FSA to make the rules in DISP:

(1)

Section 138 (General rule-making power)

(2)

Section 156 (General supplementary powers

(3)

Section 226 (Compulsory Jurisdiction)

(4)

Section 229 (Awards)

(4A)

Section 234 (Funding)

(5)

Schedule 17 paragraph 13 (FSA's procedural rules)

(6)

Article 15 (Record-keeping and reporting requirements relating to relevant complaints) of the Ombudsman Transitional Order.

The following power in the Act has been exercised by the FSA to give the guidance in DISP:

(1)

Section 157(1) (Guidance)

The following powers and related provisions in the Act have been exercised by the FOS Ltd to make the rules in DISP:

(1)

Section 227 (Voluntary Jurisdiction)

(2)

Section 230 (Costs)

(3)

Schedule 17 paragraph 8 (Guidance)

(4)

Schedule 17 paragraph 14 (The scheme's rules)

(5)

Schedule 17 paragraph 15 (Fees)

(6)

Schedule 17 paragraph 18 (Terms of reference to the scheme)

01/04/2002

DISP Sch 4.2

Table: The powers to make rules relating to the new ombudsman scheme are shared between the FSA and the Financial Ombudsman Service (FOS Ltd). FOS Ltd's rules are subject to FSA consent or approval. The rules made exclusively by FOS Ltd are:

DISP 2

2.6.9 R

2.6.11 R

DISP 3

3.2.5R

3.2.7R

3.2.8R

3.2.9R

3.2.11R

3.2.12R

3.2.13R

3.3.1R

3.4.1R

3.5.1R

3.5.2R

3.6.1R

3.6.2R

3.6.3R

3.7.1R

3.8.1R(2)

3.8.3R

3.9.10R

3.9.12R

3.9.15R

3.10.1R

DISP 4

All rules

DISP 5

5.1.6R

5.6 (all rules)

5.8.2R

5.8.4R

5.10.1R

DISP 5 Annex 1

part 3

part 4

01/12/2004

DISP Sch 5

Actions for damages for contravention under section 150 of the Act

01/12/2004

DISP Sch 5.1

The table below sets out the rules in DISP contravention of which by an authorised person may be actionable under section 150 of the Act (Actions for damages) by a person who suffers loss as a result of the contravention.

If a "Yes" appears in the column headed "For private person?", the rule may be actionable by a "private person" under section 150 (or, in certain circumstances, his fiduciary or representative; see article 6(2) and (3)(c) of the Financial Services and Markets Act 2000 (Rights of Action) Regulations 2001 (SI 2001 No 2256)). A "Yes" in the column headed "Removed" indicates that the FSA has removed the right of action under section 150(2) of the Act. If so, a reference to the rule in which it is removed is also given.

The column headed "For other person?" indicates whether the rule may be actionable by a person other than a private person (or his fiduciary or representative) under article 6(2) and (3) of those Regulations. If so, an indication of the type of person by whom the rule may be actionable is given.

01/12/2004

DISP Sch 5.2

Right of Action under s150

Chapter/Appendix

Section/Annex

Paragraph

For private person?

Removed?

For other person?

1 Complaints handling arrangements for firms

Yes

2 Jurisdiction rules

Yes

3 Complaints handling procedures of the Financial Ombudsman Service

Yes

4 The standard terms

N/A

5 Funding

Yes

01/12/2004

DISP Sch 6

Rules that can be waived

01/12/2004

DISP Sch 6.1

No rules in DISP may be waived, other than DISP 1.5.4 R, and DISP 1.4.1 R to DISP 1.4.16 R.

01/12/2004