Out-Law News | 24 Feb 2012 | 12:02 pm | 2 min. read
The independent consumer complaints body has published a draft memorandum of understanding (4-page / 40KB PDF) setting out its relationship with the FCA on its website.
The document, which is provided for under the draft Financial Services Bill, outlines the respective roles and statutory responsibilities of the two bodies. It establishes a framework for "cooperation and communication" between them and outlines the circumstances when the FOS and FCA may share information. The FOS must disclose information to the FCA where it "considers that the information would or might be of assistance" in advancing the FCA's operational objectives.
The FOS was established in 2001 under the Financial Services and Markets Act (FSMA). Its main role is to resolve disputes between consumers and financial services companies quickly and informally, as an alternative to the civil courts. The FCA will operate as the financial conduct regulator, tasked with ensuring that the financial services markets function well. Its operational objectives include securing an appropriate degree of protection for consumers.
The document stresses the independent roles and separate functions of the two bodies, but notes that cooperation and communication between the two is "particularly important" where the FCA is taking supervisory or regulatory action where the ombudsman is dealing with "a significant number of cases concerning the same issue".
Under amendments to the FSMA, the FCA must "take such steps as are necessary" to ensure that the FOS can exercise its functions. It will be responsible for appointing and removing directors whilst ensuring that they maintain their independence from the FCA, and for making rules on issues that the FOS has compulsory jurisdiction over. It will also set the levy to fund the FOS.
The FOS is responsible for adopting its own budget and setting rules for its consumer credit and voluntary jurisdictions. It will provide an annual report to the FCA on the discharge of its functions.
The Financial Services Bill will dismantle existing regulator the Financial Services Authority (FSA) and hand most of the day-to-day regulation of and supervision of banks, building societies and insurers to a new Prudential Regulation Authority (PRA) within the Bank of England. A new Financial Policy Committee (FPC), also within the Bank, will address wider 'macro-prudential' issues that may threaten economic and financial stability, while the FCA will handle conduct and compliance issues. It will also take over consumer credit regulation, including the responsibility for so-called 'payday loans' from consumer protection regulator the Office of Fair Trading (OFT)
On its website, the FOS said that it will be required to prepare and maintain a memorandum of understanding when the Financial Services Bill comes into force. It has prepared the draft document to help Parliament, businesses and consumers understand what is proposed under the Bill.
It currently has memoranda of understanding in place with other "relevant bodies", including the FSA and the OFT.