DISP Dispute Resolution: Complaints

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DISP INTRO

Introduction

DISP INTRO 1

Introduction

  • 01/12/2004

This part of the Handbook sets out how complaints are to be dealt with by respondents (firms, licensees and VJ participants) and the Financial Ombudsman Service.



It refers to relevant provisions in the Act and in transitional provisions made by the Treasury under the Act. It includes rules made by the FSA and rules made (and standard terms set) by FOS Ltd with the consent or approval of the FSA . Schedule 4 specifies the sections of the Act under which the rules in this sourcebook are made.



The powers to make rules (or set standard terms) relating to firms, licensees and VJ participants derive from various legislative provisions; but the rules (and standard terms) have been co-ordinated to ensure that they are identical, wherever possible.



Chapter 1: Treating complainants fairly

DISP 1 contains rules and guidance on how respondents should deal with complaints promptly and fairly, including complaints that could be referred to the FOS. Some of these rules also apply to certain branches of firms elsewhere in the EEA.


Chapters 2 - 4: The Financial Ombudsman Service
Chapters 2, 3 and 4 set out how the Financial Ombudsman Service (operated by FOS Ltd) considers unresolved complaints.

Chapter 2 sets out the scope of the Financial Ombudsman Service's three jurisdictions:
• the Compulsory Jurisdiction;
• the Consumer Credit Jurisdiction; and
• the Voluntary Jurisdiction.

The scope of the three jurisdictions is defined by: the type of activity to which the complaint relates; the place where the activity took place; the eligibility of the complainant; and the time limits for referring a complaint to the Financial Ombudsman Service.

Chapter 3 sets out the procedures of the Financial Ombudsman Service, including consideration and determination of complaints and how the Financial Ombudsman Service deals with information received.

Chapter 4 sets out the terms under which VJ participants participate in the Voluntary Jurisdiction.



Appendix 1: FSA's guidance on handling mortgage-endowment complaints



This appendix contains the FSA's guidance to firms on handling complaints relating to mortgage endowments.



Financial Ombudsman Service fees



The rules on fees charged in respect of the Financial Ombudsman Service are in Chapter 5 of the Fees manual.
  • 06/04/2008

Export chapter as

DISP 1


Treating complainants fairly

DISP 1.1

Purpose and application

Purpose

DISP 1.1.1

handbook-guidance
This chapter contains rules and guidance on how respondents should deal promptly and fairly with complaints in respect of business carried on from establishments in the United Kingdom or by certain branches of firms in the EEA. It is also relevant to those who may wish to make a complaint or refer it to the Financial Ombudsman Service.

Background

DISP 1.1.2

handbook-guidance
Details of how this chapter applies to each type of respondent are set out below. For this purpose, respondents include:
(1) persons carrying on regulated activities and covered by the Compulsory Jurisdiction (firms);
(2) persons covered by the Consumer Credit Jurisdiction (licensees); and
(3) persons who have opted in to the Voluntary Jurisdiction (VJ participants).

Application to firms

DISP 1.1.3

handbook-rule
(1) This chapter applies to a firm in respect of complaints from eligible complainants concerning activities carried on from an establishment maintained by it or its appointed representative in the United Kingdom.
(2) For complaints relating to the MiFID business of a firm, the complaints handling rules and the complaints record rule:
(a) apply to complaints from retail clients and do not apply to complaints from eligible complainants who are not retail clients;
(b) also apply in respect of activities carried on from a branch of a UK firm in another EEA State; and
(c) do not apply in respect of activities carried on from a branch of an EEA firm in the United Kingdom.

DISP 1.1.4

handbook-rule
Where a firm has outsourced activities to a third party processor, DISP 1.1.3 R 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.

DISP 1.1.5

handbook-rule
This chapter does not apply to:
(1) [deleted]
(2) a credit union; and
(3) an authorised professional firm in respect of expressions of dissatisfaction about its non-mainstream regulated activities

DISP 1.1.6

handbook-guidance
Analogous obligations relevant to credit unions are set out in CRED 17.

DISP 1.1.7

handbook-rule
This chapter applies to the Society, members of the Society and managing agents, subject to the Lloyd's complaint rules.

DISP 1.1.8

An insurance intermediary, that is not also an insurer, must have in place and operate appropriate and effective procedures for registering and responding to complaints from a person who is not an eligible complainant.
[Note: article 10 of the Insurance Mediation Directive]
  • 01/11/2007

DISP 1.1.9

A complaint about pre-commencement investment business which was regulated by a recognised professional body will be handled under the arrangements of that professional body and is outside the scope of this sourcebook
  • 01/11/2007

DISP 1.1.10

handbook-rule
In relation to a firm's obligations under this chapter, references to a complaint also include an expression of dissatisfaction which is capable of becoming a relevant new complaint or[deleted] a relevant transitional complaint.

FSAVC Review

DISP 1.1.11

handbook-rule
Where the subject matter of a 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, the complaints resolution rules, the complaints time limit rules, the complaints record rule and the complaints reporting rules will apply only if the complaint is about the outcome of the review.

Exemptions

DISP 1.1.12

handbook-rule
(1) A firm falling within the Compulsory Jurisdiction which does not conduct business with eligible complainants and has no reasonable likelihood of doing so, can, by written notification to the FSA , claim exemption from the rules relating to the funding of the Financial Ombudsman Service, and from the remainder of this chapter.
(2) Notwithstanding (1), the complaints handling rules and complaints record rule will continue to apply in respect of complaints concerning MiFID business.
(3) The exemption takes effect from the date on which the written notice is received by the FSA and will cease to apply when the conditions relating to the exemption no longer apply.

DISP 1.1.13

handbook-guidance
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 information submitted to the FSA under this chapter.
  • 01/11/2007

Application to licensees and VJ participants

DISP 1.1.14

handbook-rule
This chapter (except the complaints record rule and the complaints reporting rules) applies to licensees for complaints from eligible complainants.

DISP 1.1.15

handbook-rule
This chapter (except the complaints record rule and the complaints reporting rules) applies to VJ participants for complaints from eligible complainants as part of the standard terms.

DISP 1.1.16

handbook-guidance
Although licensees and VJ participants are not required to comply with the complaints record rule, it is in their interest to retain records of complaints so that these can be used to assist the Financial Ombudsman Service should it be necessary.
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DISP 1.1.17

handbook-rule
In relation to the Consumer Credit Jurisdiction only, FOS Ltd may dispense with, or modify, the application of the rules in this chapter to licensees where it considers it appropriate to do so and is satisfied that:
(1) compliance by the licensee with the rules would be unduly burdensome or would not achieve the purpose for which the rules were made; and
(2) it would not result in undue risk to the persons whose interests the rules were intended to protect.
  • 01/11/2007

DISP 1.1.18

handbook-guidance
This power is intended to deal with exceptional circumstances, for example, where it is not possible for a licensee to meet the specified time limits, and any dispensation or modification is likely to be rare.
  • 01/11/2007

Outsourcing of complaint handling

DISP 1.1.19

handbook-guidance
(1) This chapter does not prevent:
(a) the use by a respondent of a third party administrator to handle or resolve complaints (or both); or
(b) two or more respondents arranging a one-stop shop for handling or resolving complaints (or both) under a service level agreement.
(2) These arrangements do not affect respondents' obligations as set out in DISP or the provisions relating to outsourcing by a firm set out in SYSC 8 and SYSC 13.
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DISP 1.1.20

handbook-guidance
Further guidance on the application of this chapter is set out in the table in DISP 1 Annex 2.
  • 01/11/2007

DISP 1.2

Consumer awareness rules

DISP 1.2.1

handbook-rule
To aid consumer awareness of the protections offered by the provisions in this chapter, respondents must:
(1) publish appropriate summary details of their internal process for dealing with complaints promptly and fairly;
(2) refer eligible complainants in writingto the availability of these summary details at, or immediately after, the point of sale; and
(3) provide such summary details in writing to eligible complainants:
(a) on request; and
(b) when acknowledging a complaint.

DISP 1.2.2

handbook-rule
Where the activity does not involve a sale, the obligation in DISP 1.2.1R (2) shall apply at, or immediately after, the point when contact is first made with an eligible complainant.

DISP 1.2.3

handbook-guidance
These summary details should cover at least:
(1) how the respondent fulfils its obligation to handle and seek to resolve relevant complaints; and
(2) that, if the complaint is not resolved, the complainant may be entitled to refer it to the Financial Ombudsman Service.

DISP 1.2.4

handbook-guidance
The summary details may be set out in a leaflet, and their availability may be referred to in contractual documentation.

DISP 1.2.5

handbook-guidance
Respondents may also display or reproduce the Financial Ombudsman Service logo (under licence) in:
(1) branches and sales offices to which eligible complainants have access; or
(2) marketing literature or correspondence directed at eligible complainants;
provided it is done in a way which is not misleading.

DISP 1.3

Complaints handling rules

DISP 1.3.1

handbook-rule
Effective and transparent procedures for the reasonable and prompt handling of complaints must be established, implemented and maintained by:
(1) a respondent; and
(2) a branch of a UK firm in another EEA State.
[Note: article 10 of the MiFID implementing Directive]

DISP 1.3.2

handbook-guidance
These procedures should:
(1) allow complaints to be made by any reasonable means; and
(2) recognise complaints as requiring resolution.

DISP 1.3.3

handbook-rule
In respect of complaints that do not relate to MiFID business, a respondent must put in place appropriate management controls and take reasonable steps to ensure that in handling complaints it identifies and remedies any recurring or systemic problems, for example, by:
(1) analysing the causes of individual complaints so as to identify root causes common to types of complaint;
(2) considering whether such root causes may also affect other processes or products, including those not directly complained of; and
(3) correcting, where reasonable to do so, such root causes.

DISP 1.3.4

handbook-guidance
A firm should use the information it gains from dealing with complaints that relate to MiFID business in accordance with this chapter to inform its compliance with its obligations to monitor the adequacy and effectiveness of its measures and procedures to detect and minimise any risk of compliance failures (SYSC 6.1).

DISP 1.3.5

handbook-guidance
A firm should have regard to Principle 6 (Customers' interests) when it identifies problems, root causes or compliance failures and consider whether it ought to act on its own initiative with regard to the position of customers who may have suffered detriment from, or been potentially disadvantaged by such factors, but who have not complained.

DISP 1.4

Complaints resolution rules

DISP 1.4.1

handbook-rule
Once a complaint has been received by a respondent, it must:
(1) investigate the complaint competently, diligently and impartially;
(2) assess fairly, consistently and promptly:
(a) the subject matter of the complaint;
(b) whether the complaint should be upheld;
(c) what remedial action or redress (or both) may be appropriate;
(d) if appropriate, whether it has reasonable grounds to be satisfied that another respondent may be solely or jointly responsible for the matter alleged in the complaint;
taking into account all relevant factors;
(3) offer redress or remedial action when it decides this is appropriate;
(4) explain to the complainant promptly and, in a way that is fair, clear and not misleading, its assessment of the complaint, its decision on it, and any offer of remedial action or redress; and
(5) comply promptly with any offer of remedial action or redress accepted by the complainant.

DISP 1.4.2

handbook-guidance
Factors that may be relevant in the assessment of a complaint under DISP 1.4.1R (2), include the following:
(1) all the evidence available and the particular circumstances of the complaint;
(2) similarities with other complaints received by the respondent;
(3) relevant guidance published by the FSA , other relevant regulators, the Financial Ombudsman Service or former schemes; and
(4) appropriate analysis of decisions by the Financial Ombudsman Service concerning similar complaints received by the respondent.

DISP 1.4.3

handbook-guidance
The respondent should aim to resolve complaints at the earliest possible opportunity, minimising the number of unresolved complaints which need to be referred to the Financial Ombudsman Service.

DISP 1.4.4

handbook-rule
Where a complaint against a respondent is referred to the Financial Ombudsman Service, the respondent must cooperate fully with the Financial Ombudsman Service and comply promptly with any settlements or awards made by it.

DISP 1.4.5

handbook-guidance
DISP App 1 contains guidance to respondents on the approach to assessing financial loss and appropriate redress where a respondent upholds a complaint concerning the sale of an endowment policy for the purposes of repaying a mortgage.

DISP 1.5

Complaints resolved by close of the next business day

DISP 1.5.1

handbook-rule
The following rules do not apply to a complaint that is resolved by a respondent by close of business on the business day following its receipt:
(1) the complaints time limit rules;
(2) the complaints forwarding rules;
(3) the complaints reporting rules; and
(4) the complaints record rule, if the complaint does not relate to MiFID business.

DISP 1.5.2

handbook-guidance
Complaints falling within this section are still subject to the complaint resolution rules.

DISP 1.5.3

handbook-guidance
For the purposes of this section:
(1) a complaint received on any day other than a business day, or after close of business on a business day, may be treated as received on the next business day; and
(2) a complaint is resolved where the complainant has indicated acceptance of a response from the respondent, with neither the response nor acceptance having to be in writing

DISP 1.6

Complaints time limit rules

Keeping the complainant informed

DISP 1.6.1

handbook-rule
On receipt of a complaint, a respondent must:
(1) send the complainant a prompt written acknowledgement providing early reassurance that it has received the complaint and is dealing with it; and
(2) ensure the complainant is kept informed thereafter of the progress of the measures being taken for the complaint's resolution.

Final or other response within eight weeks

DISP 1.6.2

handbook-rule
The respondent must, by the end of eight weeks after its receipt of the complaint, send the complainant:
(1) a final response; or
(2) a written response which:
(a) explains why it is not in a position to make a final response and indicates when it expects to be able to provide one;
(b) informs the complainant that he may now refer the complaint to the Financial Ombudsman Service; and
(c) encloses a copy of the Financial Ombudsman Service standard explanatory leaflet.

DISP 1.6.3

handbook-guidance
Respondents are not obliged to comply with the requirements in DISP 1.6.2 R where they are able to rely on any of the following rules:
(1) the complainant's written acceptance rule (DISP 1.6.4 R);
(2) the rules for respondents with two-stage complaints procedures (DISP 1.6.5 R); or
(3) the complaints forwarding rules (DISP 1.7).
  • 01/11/2007

Complainant's written acceptance

DISP 1.6.4

handbook-rule
DISP 1.6.2 R does not apply if the complainant has already indicated in writing acceptance of a response by the respondent, provided that the response:
(1) informed the complainant how to pursue his complaint with the respondent if he remains dissatisfied; and
(2) referred to the ultimate availability of the Financial Ombudsman Service if he remains dissatisfied with the respondent's response.

Respondents with two-stage complaints procedures

DISP 1.6.5

handbook-rule
If, within eight weeks of receiving a complaint, the respondent sends the complainant a written response which:
(1) offers redress or remedial action (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 respondent if he remains dissatisfied;
(3) refers to the ultimate availability of the Financial Ombudsman Service if he remains dissatisfied with the respondent's response; and
(4) indicates it will regard the complaint as closed if it does not receive a reply within eight weeks;
the respondent is not obliged to continue to comply with DISP 1.6.2 R unless the complainant indicates that he remains dissatisfied, in which case, the obligation to comply with DISP 1.6.2 R resumes.

DISP 1.6.6

handbook-rule
If the complainant takes more than a week to reply to a written response of the kind described in DISP 1.6.5 R, the additional time in excess of a week will not count for the purposes of the time limits in DISP 1.6.2 R or the complaints reporting rules.
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DISP 1.6.6A

handbook-guidance
The information regarding the Financial Ombudsman Service required to be provided in responses sent under the complaints time limit rules (DISP 1.6.2 R, DISP 1.6.4 R and DISP 1.6.5 R) should be set out prominently within the text of those responses.

Speed and quality of response

DISP 1.6.7

handbook-guidance
It is expected that within eight weeks of their receipt, almost all complaints to a respondent will have been substantively addressed by it through a final response or response as described in DISP 1.6.4 R or DISP 1.6.5 R.

DISP 1.6.8

handbook-guidance
When assessing a respondent's response to a complaint, the FSA may have regard to a number of factors, including, the quality of response, as against the complaints resolution rules, as well as the speed with which it was made.
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DISP 1.7

Complaints forwarding rules

DISP 1.7.1

handbook-rule
A respondent that has reasonable grounds to be satisfied that another respondent may be solely or jointly responsible for the matter alleged in a complaint may forward the complaint, or the relevant part of it, in writing to that other respondent, provided it:
(1) does so promptly;
(2) informs the complainant promptly in a final response of why the complaint has been forwarded by it to the other respondent, and of the other respondent's contact details; and
(3) where jointly responsible for the fault alleged in the complaint, it complies with its own obligations under this chapter in respect of that part of the complaint it has not forwarded.

Dealing with a forwarded complaint

DISP 1.7.2

handbook-rule
When a respondent receives a complaint that has been forwarded to it under DISP 1.7.1 R, the complaint is treated for the purposes of DISP as if made directly to that respondent, and as if received by it when the forwarded complaint was received.

DISP 1.7.3

handbook-guidance
On receiving a forwarded complaint, the standard time limits will apply from the date on which the respondent receives the forwarded complaint.

DISP 1.8

Complaints time barring rule

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DISP 1.8.1

handbook-rule
If a respondent receives a complaint which is outside the time limits for referral to the Financial Ombudsman Service (see DISP 2.8) it may reject the complaint without considering the merits, but must explain this to the complainant in a final response in accordance with DISP 1.6.2 R and indicate that the Ombudsman may waive the time limits in exceptional circumstances.

DISP 1.9

Complaints record rule

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DISP 1.9.1

handbook-rule
A firm, including, in the case of MiFID business, a branch of a UK firm in another EEA state, must keep a record of each complaint received and the measures taken for its resolution, and retain that record for:
(1) at least five years where the complaint relates to MiFID business; and
(2) three years for all other complaints;
from the date the complaint was received.
[Note: article 10 of the MiFID implementing Directive]

DISP 1.10

Complaints reporting rules

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DISP 1.10.1

handbook-rule
Twice a year a firm must provide the FSA with a complete report concerning complaints received from eligible complainants. The report must be set out in the format in DISP 1 Annex 1.
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Joint reports

DISP 1.10.1A

handbook-rule
[Text to follow]

DISP 1.10.1B

handbook-guidance
[Text to follow]

DISP 1.10.1C

handbook-rule
Firms that are part of a group may submit a joint report to the FSA . The joint report must contain the information required from all firms concerned and clearly indicate the firms on whose behalf the report is submitted. The requirement to provide a report, and the responsibility for the report, remains with each firm in the group.
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DISP 1.10.1D

handbook-guidance
Not all the firms in the group need to submit the report jointly. Firms should only consider submitting a joint report if it is logical to do so, for example, where the firms have a common central complaints handling team and the same accounting reference date.
  • 14/12/2007

DISP 1.10.2

handbook-rule
DISP 1 Annex 1 requires (for the relevant reporting period) information about:
(1) the total number of complaints received by the firm, broken down according to the categories and generic product types described in DISP 1 Annex 1 which are relevant to the firm;
(2) the total number of complaints closed by the firm:
(a) within four weeks or less of receipt;
(b) within four to eight weeks of receipt; and
(c) more than eight weeks after receipt;
(3) the total number of complaints:
(a) upheld by the firm in the reporting period;
(b) that the firm knows have been referred to, and accepted by, the Financial Ombudsman Service in the reporting period;
(c) outstanding at the beginning of the reporting period; and
(d) outstanding at the end of the reporting period; and
(4) the total amount of redress paid in respect of complaints during the reporting period.

DISP 1.10.3

handbook-guidance
For the purpose of DISP 1.10.2 R, when completing the return, the firm should take into account the following matters.
(1) If 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) Under DISP 1.10.2R (3)(a), a firm should report any complaint to which it has given a final response which upholds the complaint, even if any 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. However, where a firm rejects a complaint, yet chooses to make a goodwill payment to the complainant, the complaint should be recorded as 'rejected'.
(3) If a firm reports on the amount of redress paid under DISP 1.10.2R (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;
(c) goodwill payments and goodwill gestures;
(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) If a firm reports on the amount of redress paid under DISP 1.10.2R (4), the 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.

DISP 1.10.4

handbook-rule
The relevant reporting periods are:
(1) the six months immediately following a firm's accounting reference date; and
(2) the six months immediately preceding a firm's accounting reference date.
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DISP 1.10.5

handbook-rule
Reports are to be submitted to the FSA within 30 business days of the end of the relevant reporting periods through, and in the electronic format specified in, the FSA Complaints Reporting System or the appropriate section of the FSA website.
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DISP 1.10.6

handbook-rule
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.
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DISP 1.10.7

handbook-rule
A closed complaint is a complaint where:
(1) the firm has sent a final response; or
(2) the complainant has indicated in writing acceptance of the firm's earlier response under DISP 1.6.4 R; or
(3) for a firm which operates a two-stage complaints procedure, the complainant has not indicated that he remains dissatisfied within eight weeks of the response sent by the firm under DISP 1.6.5 R.

DISP 1.10.8

handbook-guidance
If a complaint is reported as closed under DISP 1.10.2R (2) because the complainant has not replied to the firm within eight weeks of a written response which meets the requirements in DISP 1.6.5 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 1.10.2R (2).
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Notification of contact point for complainants

DISP 1.10.9

handbook-rule
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 the complaints reporting rules.
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DISP 1.11

The Society of Lloyd's

  • 01/11/2007

DISP 1.11.1

handbook-rule
The Society must establish and maintain appropriate and effective procedures for handling complaints by policyholders against members of the Society which comply with this chapter.
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DISP 1.11.2

handbook-rule
A member of the Society must, in complying with this chapter, ensure that the arrangements which the member maintains are compatible with the Lloyd's complaint procedures, so that, taken as a whole, the requirements of this sourcebook are met.
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DISP 1.11.3

handbook-rule
The Society must take reasonable steps to ensure that complaints by policyholders against members of the Society are dealt with under the Lloyd's complaint procedures and that members comply with the requirements of those procedures.
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DISP 1.11.4

handbook-rule
A complaint by a policyholder against a member of the Society may not be referred to the Financial Ombudsman Service until after the Lloyd's complaint procedures have been completed or until after the end of eight weeks from receipt of the complaint, whichever is the earlier.
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DISP 1.11.5

handbook-rule
(1) A notification claiming exemption under DISP 1.1.12 R from the complaints reporting rules and the rules relating to the funding of the Financial Ombudsman Service must be given to the FSA by the Society on behalf of any member eligible for an exemption.
(2) The Society must notify the FSA if the conditions relating to such an exemption no longer apply to a member who is exempt.
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DISP 1.11.6

handbook-rule
The report to be sent to the FSA under the complaints reporting rules must be provided by the Society and must cover all complaints by policyholders against members falling within the scope of the complaints reporting rules.
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DISP 1.11.7

handbook-guidance
Each member of the Society is individually subject to the rules in this chapter as a result of the insurance market direction given in DISP 2.5.4 G under section 316 of the Act (Direction by Authority).
  • 01/11/2007

DISP 1.11.8

handbook-guidance
However, the Society 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's in-house Complaints Department. This procedure (and any procedure that may replace it) will be subject to the requirements in this chapter.
  • 01/11/2007

DISP 1.11.9

handbook-guidance
Members will individually comply with this chapter if and only if all complaints by policyholders against members are dealt with under the Lloyd's complaints procedures. Accordingly, certain of the obligations under this chapter, for example the obligation to report on complaints received and the obligation to pay fees under the rules relating to the funding of the Financial Ombudsman Service (FEES 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 the complaints reporting rules sent by the Society.
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DISP 1.11.10

handbook-rule
A members' adviser must establish and maintain effective arrangements for handling any complaint from a member of the Society regarding advice given to the member in connection with the acquiring or disposing of syndicate participation.
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DISP 1.11.11

handbook-guidance
Complaints from members of the Society regarding the activities of members' advisers, which cannot be resolved by the members' adviser, cannot be referred to the Financial Ombudsman Service.
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DISP 1.11.12

handbook-guidance
The Financial Ombudsman Service is not able to deal with the complaints listed in DISP 1.11.13 R and separate rules and guidance are therefore required.
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DISP 1.11.13

handbook-rule
The Society must establish and maintain appropriate and effective arrangements for handling any complaint from a member or a former member about:
(1) regulated activities carried on by the Society;
(2) the Society's regulatory functions carried on by the Society, the Council or those to whom the Council delegates authority to carry out such functions;
(3) advice given by an underwriting agent to a person to become, continue or cease to be, a member of a particular syndicate; and
(4) the management by a managing agent of the underwriting capacity of a syndicate on which the complainant participates or has participated.
  • 01/11/2007

DISP 1.11.14

handbook-rule
The Society must maintain by byelaw one or more appropriate effective schemes for the resolution of disputes between an individual member or a former member who was an individual member and:
(1) his underwriting agent; or
(2) the Society.
  • 01/11/2007

DISP 1.11.15

handbook-rule
For the purposes of DISP 1.11.13 R "individual member" includes a member which is a limited liability partnership or a body corporate whose members consist only of, or of the nominees for, a single natural person or a group of connected persons.
  • 01/11/2007

DISP 1.11.16

handbook-guidance
The schemes to which DISP 1.11.13 R currently refers are the Lloyd's Arbitration Scheme and the Lloyd's Members' Ombudsman respectively, but the Society may maintain other independent dispute resolution schemes in addition to, or instead of, either of these schemes.
  • 01/11/2007

DISP 1.11.17

handbook-guidance
The schemes referred to in DISP 1.11.13 R should be operationally independent of the Society.
  • 01/11/2007

DISP 1.11.18

handbook-guidance
An individual member or former member who was an individual member should not have access to the schemes referred to in DISP 1.11.13 R unless the complaints arrangements maintained by the Society have failed to resolve the complaint to his satisfaction within eight weeks of receiving it.
  • 01/11/2007

DISP 1.11.19

handbook-guidance
The Society should give the FSA adequate notice of all proposed changes to the byelaws relating to the schemes referred to in DISP 1.11.13 R.
  • 01/11/2007

DISP 1.11.20

handbook-guidance
When considering what is required to ensure the operational independence of the schemes referred to in DISP 1.11.13 R, or proposed changes in such schemes, the Society should take account of similar arrangements operated by the Financial Ombudsman Service.
  • 01/11/2007

DISP 1.11.21

handbook-rule
A contravention of DISP 1.11.13 R or DISP 1.11.14 R does not give rise to a right of action by a private person under section 150 of the Act (Actions for damages) and each of those rules is specified under section 150(2) of the Act as a provision giving rise to no such right of action.
  • 01/11/2007

DISP 1 Annex 1

Complaints return form

  • 01/12/2004

handbook-rule
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

DISP 1 Annex 2

handbook-guidance

Export chapter as

DISP 2

Jurisdiction of the Financial Ombudsman Service

DISP 2.1

Purpose, interpretation and application

Purpose

DISP 2.1.1

handbook-guidance
The purpose of this chapter is to set out rules and guidance on the scope of the Compulsory Jurisdiction, the Consumer Credit Jurisdiction and the Voluntary Jurisdiction, which are the Financial Ombudsman Service's three jurisdictions:
(1) the Compulsory Jurisdiction is not restricted to regulated activities and covers:
(a) certain complaints against firms (and businesses which were firms at the time of the events complained about); and
(b) relevant complaints against former members of former schemes under the Ombudsman Transitional Order and the Mortgage and General Insurance Complaints Transitional Order;
(2) the Consumer Credit Jurisdiction covers certain complaints against licensees (and businesses which were licensees at the time of the events complained about); and
(3) the Voluntary Jurisdiction covers certain complaints against VJ participants, including in relation to events before they joined the Voluntary Jurisdiction.

DISP 2.1.2

handbook-guidance

DISP 2.1.3

handbook-guidance
The Ombudsman Transitional Order requires the Financial Ombudsman Service to complete the handling of relevant existing complaints, in a significant number of respects, in accordance with the requirements of the relevant former scheme rather than in accordance with the requirements of this chapter.

Interpretation

DISP 2.1.4

handbook-guidance
In this chapter, carrying on an activity includes:
(1) offering, providing or failing to provide a service in relation to an activity;
(2) administering or failing to administer a service in relation to an activity; and
(3) the manner in which a respondent has administered its business, provided that the business is an activity subject to the Financial Ombudsman Service's jurisdiction.

Purpose

DISP 2.1.5

handbook-guidance
In this chapter, ancillary banking services include, for example, the provision and operation of cash machines, foreign currency exchange, safe deposit boxes and account aggregation services (services where details of accounts held with different financial service providers can be accessed by a single password).

Application

DISP 2.1.6

handbook-rule
This chapter applies to the Ombudsman and to respondents.
  • 06/04/2008

DISP 2.1.7

handbook-directions
Part XVI of the Act (The Ombudsman Scheme), particularly section 226 (Compulsory jurisdiction), applies to members of the Society of Lloyd's in respect of the regulated activities of effecting or carrying out contracts of insurance written at Lloyd's.

DISP 2.2

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

  • 01/12/2004

DISP 2.2.1

handbook-guidance
The scope of the Financial Ombudsman Service's three jurisdictions depends on:
(1) the type of activity to which the complaint relates (see DISP 2.3, DISP 2.4 and DISP 2.5);
(2) the place where the activity to which the complaint relates was carried on (see DISP 2.6);
(3) whether the complainant is eligible (see DISP 2.7); and
(4) whether the complaint was referred to the Financial Ombudsman Service in time (see DISP 2.8).

DISP 2.3

To which activities does the Compulsory Jurisdiction apply?

DISP 2.3.1

handbook-rule
The Ombudsman can consider a complaint under the Compulsory Jurisdiction if it relates to an act or omission by a firm in carrying on one or more of the following activities:
(1) regulated activities ;
(2) consumer credit activities;
(3) lending money secured by a charge on land;
(4) lending money (excluding restricted credit where that is not a consumer credit activity);
(5) paying money by a plastic card (excluding a store card where that is not a consumer credit activity);
(6) providing ancillary banking services;
or any ancillary activities, including advice, carried on by the firm in connection with them.

DISP 2.3.2

handbook-guidance
The Ombudsman can also consider under the Compulsory Jurisdiction:
(1) as a result of the Ombudsman Transitional Order, a relevant existing complaint or a relevant new complaint that relates to an act or omission by a firm or an unauthorised person which was subject to a former scheme immediately before commencement; or
(2) as a result of the Mortgages and General Insurance Complaints Transitional Order, a relevant transitional complaint that relates to an act or omission by a firm (or an unauthorised person that ceased to be a firm after the relevant commencement date) which was subject to a former scheme at the time of the act or omission;
provided that:
(3) the act or omission occurred in the carrying on by that firm or unauthorised person of an activity to which that former scheme applied; and
(4) the complainant is eligible and wishes to have the complaint dealt with by the Ombudsman.

DISP 2.3.3

handbook-guidance
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).

DISP 2.3.4

handbook-rule
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.

DISP 2.4

To which activities does the Consumer Credit Jurisdiction apply?

DISP 2.4.1

handbook-rule
The Ombudsman can consider a complaint under the Consumer Credit Jurisdiction if:
(1) it is not covered by the Compulsory Jurisdiction; and
(2) it relates to an act or omission by a licensee in carrying on
(a) one or more consumer credit activities; or
(b) any ancillary activities, including advice, carried on by the licensee in connection with them.

DISP 2.5

To which activities does the Voluntary Jurisdiction apply?

DISP 2.5.1

handbook-rule
The Ombudsman can consider a complaint under the Voluntary Jurisdiction if:
(1) it is not covered by the Compulsory Jurisdiction or the Consumer Credit Jurisdiction; and
(2) it relates to an act or omission by a VJ participant in carrying on one or more of the following activities:
(a) an activity carried on after 28 April 1988 which:
(i) was not a regulated activity at the time of the act or omission, but
(ii) was a regulated activity when the VJ participant joined the Voluntary Jurisdiction (or became an authorised person, if later);
(b) a financial services activity carried on after commencement by a VJ participant which was covered in respect of that activity by a former scheme immediately before the commencement day;
(c) activities which (at 1 July 2007) were regulated activities or would be regulated activities if they were carried on from an establishment in the United Kingdom (these activities are listed in DISP 2 Annex 1);
(d) activities which would be consumer credit activities if they were carried on from an establishment in the United Kingdom
(e) lending money secured by a charge on land;
(f) lending money (excluding restricted credit where that is not a consumer credit activity );
(g) paying money by a plastic card (excluding a store card where that is not a consumer credit activity );
(h) providing ancillary banking services;
(i) acting as an intermediary for a loan secured by a charge over land;
(j) acting as an intermediary for general insurance business or long-term insurance business;
(k) National Savings and Investments' business;
or any ancillary activities, including advice, carried on by the VJ participant in connection with them.

DISP 2.5.2

handbook-guidance
The scope of the Voluntary Jurisdiction is wider than that of the Compulsory Jurisdiction, and so some activities are referred to in both jurisdictions.

DISP 2.5.3

handbook-guidance
DISP 2.5.1R (2)(a)is for those that are subject to the Compulsory Jurisdiction for regulated activities but are not covered by the Ombudsman Transitional Order or the Mortgage and General Insurance Complaints Transitional Order. It enables the Financial Ombudsman Scheme to cover complaints about earlier events relating to those activities before they became regulated activities.

DISP 2.5.4

handbook-guidance
DISP 2.5.1R (2)(b) is for those that were members of one of the former schemes replaced by the Financial Ombudsman Service immediately before commencement. It enables the Financial Ombudsman Service to cover complaints that arise out of acts or omissions occurring after commencement for any activities which are not covered by the Compulsory Jurisdiction but that would have been covered by the relevant former scheme.

DISP 2.5.5

handbook-rule
The Voluntary Jurisdiction covers an act or omission that occurred before the VJ participant was participating in the Voluntary Jurisdiction, and whether the act or omission occurred before or after commencement, either:
(1) if the complaint could have been dealt with under a former scheme; or
(2) under the agreement by the VJ participant in the Standard Terms.
  • 06/04/2008

DISP 2.6

What is the territorial scope of the relevant jurisdiction?

Compulsory Jurisdiction

DISP 2.6.1

handbook-rule
The Compulsory Jurisdiction covers complaints about the activities of a firm (including its appointed representatives) carried on from an establishment in the United Kingdom.
(1) [deleted]
(2) [deleted]
(3) [deleted]
(4) [deleted]
(5) [deleted]
(6) [deleted]

DISP 2.6.2

handbook-guidance
This:
(1) includes incoming EEA firms and incoming Treaty firms; but
(2) excludes complaints about business conducted in the United Kingdom on a services basis from an establishment outside the United Kingdom.

Consumer Credit Jurisdiction

DISP 2.6.3

handbook-rule
The Consumer Credit Jurisdiction covers only complaints about the activities of a licensee carried on from an establishment in the United Kingdom.

Voluntary Jurisdiction

DISP 2.6.4

handbook-rule
The Voluntary Jurisdiction covers only complaints about the activities of a VJ participant carried on from an establishment:
(1) in the United Kingdom; or
(2) elsewhere in the EEA if the following conditions are met:
(a) the activity is directed wholly or partly at the United Kingdom (or part of it);
(b) 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
(c) the VJ participant has notified appropriate regulators in its Home State of its intention to participate in the Voluntary Jurisdiction.

Location of the complainant

DISP 2.6.5

handbook-guidance
A complaint can be dealt with under the Financial Ombudsman Service whether or not the complainant lives or is based in the United Kingdom.

DISP 2.7

Is the complainant eligible?

DISP 2.7.1

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

DISP 2.7.2

handbook-rule
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. It is immaterial whether the person authorised to act on behalf of an eligible complainant is himself an eligible complainant.

Eligible complainants

DISP 2.7.3

handbook-rule
An eligible complainant must be a person that is:
(1) a private individual;
(2) a business, which has a group annual turnover of less than ?1 million at the time the complainant refers the complaint to the respondent;
(3) a charity which has an annual income of less than £1 million at the time the complainant refers the complaint to the respondent; or
(4) 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 respondent.

DISP 2.7.4

handbook-guidance
A business includes a sole trader, a company, an unincorporated body and a partnership carrying on any trade or profession. A subsidiary of a corporate group will be eligible only where the corporate group as a whole meets the turnover test.

DISP 2.7.5

handbook-guidance
If a respondent is in 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.

DISP 2.7.6

handbook-rule
To be an eligible complainant a person must also have a complaint which arises from matters relevant to one or more of the following relationships with the respondent:
(1) the complainant is (or was) a customer of the respondent;
(2) the complainant is (or was) a potential customer of the respondent;
(3) the complainant is the holder, or the beneficial owner, of units in a collective investment scheme and the respondent is the operator or depositary of the scheme;
(4) the complainant is a beneficiary of, or has a beneficial interest in, a personal pension scheme or stakeholder pension scheme;
(5) the complainant is a person for whose benefit a contract of insurance was taken out or was intended to be taken out with or through the respondent;
(6) the complainant is a person on whom the legal right to benefit from a claim against the respondent under a contract of insurance has been devolved by contract, assignment, subrogation or legislation (save the European Community (Rights against Insurers) Regulations 2002);
(7) the complainant relied in the course of his business on a cheque guarantee card issued by the respondent;
(8) 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 respondent for someone else's account;
(9) the complainant is the recipient of a banker's reference given by the respondent;
(10) the complainant gave the respondent a guarantee or security for:
(a) a mortgage;
(b) a loan;
(c) an actual or prospective regulated consumer credit agreement;
(d) an actual or prospective regulated consumer hire agreement; or
(e) any linked transaction as defined in the Consumer Credit Act 1974 (as amended);
(11) the complainant is a person about whom information relevant to his financial standing is or was held by the respondent in operating a credit reference agency as defined by section 145(8) of the Consumer Credit Act 1974 (as amended);
(12) the complainant is a person:
(a) from whom the respondent has sought to recover payment under a regulated consumer credit agreement or regulated consumer hire agreement in carrying on debt-collecting as defined by section 145(7) of the Consumer Credit Act (1974) (as amended); or
(b) in relation to whom the respondent has sought to perform duties, or exercise or enforce rights, on behalf of the creditor or owner, under a regulated consumer credit agreement or regulated consumer hire agreement in carrying on debt administration as defined by section 145(7A) of the Consumer Credit Act (1974) (as amended);
(13) the complainant is a beneficiary under a trust or estate of which the respondent is trustee or personal representative.

DISP 2.7.7

handbook-guidance
DISP 2.7.6R (5)and DISP 2.7.6R (6) 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.
  • 06/04/2008

DISP 2.7.8

handbook-guidance
In the Compulsory Jurisdiction, under the Ombudsman Transitional Order and the Mortgages and General Insurance Complaints Transitional Order, where a complainant:
(1) wishes to have a relevant new complaint or a relevant transitional complaint dealt with by the Ombudsman; and
(2) is not otherwise eligible; but
(3) would have been entitled to refer an equivalent complaint to the former scheme in question immediately before the relevant transitional order came into effect;
if the Ombudsman considers it appropriate, he may treat the complainant as an eligible complainant.
  • 06/04/2008

Exceptions

DISP 2.7.9

handbook-rule
The following are not eligible complainants:
(1) (in all jurisdictions) a firm, licensee or VJ participant whose complaint relates in any way to an activity which:
(a) the firm itself has permission to carry on; or
(ab)
(b) the licensee or VJ participant itself conducts;
and which is subject to the Compulsory Jurisdiction, the Consumer Credit Jurisdiction or the Voluntary Jurisdiction;
(2) (in the Compulsory Jurisdiction) a complainant, other than a trustee of a pension scheme trust, who was:
(a) a professional client; or
(b) an eligible counterparty;
in relation to the firm and activity in question at the time of the act or omission which is the subject of the complaint; and
(3) (in the Consumer Credit Jurisdiction):
(a) a body corporate;
(b) a partnership consisting of more than three persons;
(c) a partnership all of whose members are bodies corporate; or
(d) an unincorporated body which consists entirely of bodies corporate.

DISP 2.7.10

handbook-guidance
In the Compulsory Jurisdiction, in relation to relevant new complaints under the Ombudsman Transitional Order and relevant transitional complaints under the Mortgages and General Insurance Complaints Transitional Order:
(1) where the former scheme in question is the Insurance Ombudsman Scheme, a complainant is not to be treated as an eligible complainant unless:
(a) he is an individual; and
(b) the relevant new complaint does not concern aspects of a policy relating to a business or trade carried on by him;
(2) where the former scheme in question is the GISC facility, a complainant is not to be treated as an eligible complainant unless:
(a) he is an individual; and
(b) he is acting otherwise than solely for the purposes of his business; and
(3) where the former scheme in question is the MCAS scheme, a complainant is not to be treated as an eligible complainant if:
(a) the relevant transitional complaint does not relate to a breach of the Mortgage Code published by the Council of Mortgage Lenders;
(b) the complaint concerns physical injury, illness, nervous shock or their consequences; or
(c) the complainant is claiming a sum of money that exceeds £100,000.
  • 06/04/2008

DISP 2.8

Was the complaint referred to the Financial Ombudsman Service in time?

  • 06/04/2008

DISP 2.8.1

handbook-rule
The Ombudsman can only consider a complaint if:
(1) the respondent has already sent the complainant its final response; or
(2) eight weeks have elapsed since the respondent received the complaint.

DISP 2.8.2

handbook-rule
The Ombudsman cannot consider a complaint if the complainant refers it to the Financial Ombudsman Service:
(1) more than six months after the date on which the respondent sent the complainant its final response; or
(2) more than:
(a) six years after the event complained of; or (if later)
(b) three years from the date on which the complainant became aware (or ought reasonably to have become aware) that he had cause for complaint;
unless the complainant referred the complaint to the respondent or to the Ombudsman within that period and has a written acknowledgement or some other record of the complaint having been received;
unless:
(3) in the view of the Ombudsman, the failure to comply with the time limits was as a result of exceptional circumstances; or
(4) the Ombudsman is required to do so by the Ombudsman Transitional Order; or
(5) the respondent has not objected to the Ombudsman considering the complaint.

DISP 2.8.3

handbook-guidance
The six-month time limit is only triggered by a response which is a final response. A final response must tell the complainant about the six-month time limit that the complainant has to refer a complaint to the Financial Ombudsman Service.
  • 06/04/2008

DISP 2.8.4

handbook-guidance
An example of exceptional circumstances might be where the complainant has been or is incapacitated.
  • 06/04/2008

Reviews of past business

DISP 2.8.5

handbook-rule
The six-year and the three-year time limits do 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.

Mortgage endowment complaints

DISP 2.8.6

handbook-guidance
If a 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 2.8.2R (2) to start to run.
  • 06/04/2008

DISP 2.8.7

handbook-rule
(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 2.8.2R (2) to apply.
  • 06/04/2008

DISP 2 Annex 1

Regulated activities at 1 July 2007

handbook-guidance
The activities which (at 1 July 2007) were regulated activities were, in accordance with section 22 of the Act (The classes of activity and categories of investment), any of the following activities specified in Part II of the Regulated Activities Order:
(1) accepting deposits (article 5);
(2) issuing electronic money (article 9B);
(3) effecting contracts of insurance (article 10(1));
(4) carrying out contracts of insurance (article 10(2));
(5) dealing in investments as principal (article 14);
(6) dealing in investments as agent (article 21);
(7) arranging (bringing about) deals in investments (article 25(1));
(8) making arrangements with a view to transactions in investments (article 25(2));
(9) arranging (bringing about) regulated mortgage contracts (article 25A(1));
(10) making arrangements with a view to regulated mortgage contracts (article 25A(2));
(11) arranging (bringing about) a home reversion plan (article 25B(1));
(12) making arrangements with a view to a home reversion plan (article 25B(2));
(13) arranging (bringing about) a home purchase plan (article 25C(1));
(14) making arrangements with a view to a home purchase plan (article 25C(2));
(15) managing investments (article 37);
(16) assisting in the administration and performance of a contract of insurance (article 39A);
(17) safeguarding and administering investments (article 40);
(18) sending dematerialised instructions (article 45(1));
(19) causing dematerialised instructions to be sent (article 45(2));
(20) establishing, operating or winding up a collective investment scheme (article 51(1)(a));
(21) acting as trustee of an authorised unit trust scheme (article 51(1)(b));
(22) acting as the depositary or sole director of an open-ended investment company (article 51(1)(c));
(23) establishing, operating or winding up a stakeholder pension scheme (article 52(a));
(24) providing basic advice on a stakeholder product (article 52B);
(25) establishing, operating or winding up a personal pension scheme (article 52(b));
(26) advising on investments (article 53);
(27) advising on regulated mortgage contracts (article 53A);
(28) advising on a home reversion plan (article 53B);
(29) advising on a home purchase plan (article 53C);
(30) advising on syndicate participation at Lloyd's (article 56);
(31) managing the underwriting capacity of a Lloyd's syndicate as a managing agent at Lloyd's (article 57);
(32) arranging deals in contracts of insurance written at Lloyd's (article 58);
(33) entering into a regulated mortgage contract (article 61(1));
(34) administering a regulated mortgage contract (article 61(2));
(35) entering into a home reversion plan (article 63B(1));
(36) administering a home reversion plan (article 63B(2));
(37) entering into a home purchase plan (article 63F(1));
(38) administering a home purchase plan (article 63F(2));
(39) entering as provider into a funeral plan contract (article 59);
(40) agreeing to carry on a regulated activity (article 64);
which is carried on by way of business and relates to a specified investment applicable to that activity or, in the case of (20), (21), (22) and (23), is carried on in relation to property of any kind.

Export chapter as

DISP 3

Complaint handling procedures of the Financial Ombudsman Service

DISP 3.1

Purpose, interpretation and application

Purpose

DISP 3.1.1

handbook-guidance
The purpose of this chapter is to set out:
(1) the procedures of the Financial Ombudsman Service for investigating and determining complaints;
(2) the basis on which the Ombudsman makes decisions; and
(3) the awards which the Ombudsman can make.

Interpretation

DISP 3.1.2

handbook-rule
In this chapter, 'out of jurisdiction' means outside the Compulsory Jurisdiction, the Consumer Credit Jurisdiction and the Voluntary Jurisdiction in accordance with DISP 2.

DISP 3.1.3

handbook-rule
Where the respondent is a partnership (or former partnership), it is sufficient for the Ombudsman to communicate with one partner (or former partner).

DISP 3.1.4

handbook-guidance
The Ombudsman Transitional Order requires the Financial Ombudsman Service to complete the handling of relevant existing complaints, in a significant number of respects, in accordance with the requirements of the relevant former scheme rather than in accordance with the requirements of this chapter.

Application

DISP 3.1.5

handbook-rule
This chapter applies to the Ombudsman and to respondents.

DISP 3.2

Jurisdiction

DISP 3.2.1

handbook-rule
The Ombudsman will have regard to whether a complaint is out of jurisdiction.

DISP 3.2.2

handbook-rule
Unless the respondent has already had eight weeks to consider the complaint or issued a final response, the Ombudsman will refer the complaint to the respondent.

DISP 3.2.3

handbook-rule
Where the respondent alleges that the complaint is out of jurisdiction, the Ombudsman will give both parties an opportunity to make representations before he decides.

DISP 3.2.4

handbook-rule
Where the Ombudsman considers that the complaint may be out of jurisdiction, he will give the complainant an opportunity to make representations before he decides.

DISP 3.2.5

handbook-rule
Where the Ombudsman then decides that the complaint is out of jurisdiction, he will give reasons for that decision to the complainant and inform the respondent.

DISP 3.2.6

handbook-rule
Where the Ombudsman then decides that the complaint is not out of jurisdiction, he will inform the complainant and give reasons for that decision to the respondent.

DISP 3.3

Dismissal without consideration of the merits and test cases

DISP 3.3.1

handbook-rule
Where the Ombudsman considers that the complaint may be one which should be dismissed without consideration of the merits, he will give the complainant an opportunity to make representations before he decides.

DISP 3.3.2

handbook-rule
Where the Ombudsman then decides that the complaint should be dismissed without consideration of the merits, he will give reasons to the complainant for that decision and inform the respondent.

DISP 3.3.3

handbook-guidance
Under the Ombudsman Transitional Order and the Mortgage and General Insurance Complaints Transitional Order, where the Ombudsman is dealing with a relevant complaint, he must take into account whether an equivalent complaint would have been dismissed without consideration of its merits under the former scheme in question, as it had effect immediately before the relevant transitional order came into effect.

Grounds for dismissal

DISP 3.3.4

handbook-rule
The Ombudsman may dismiss a complaint without considering its merits if he considers that:
(1) the complainant has not suffered (or is unlikely to suffer) financial loss, material distress or material inconvenience; or
(2) the complaint is frivolous or vexatious; or
(3) the complaint clearly does not have any reasonable prospect of success; or
(4) the respondent has already made an offer of compensation (or a goodwill payment) which is:
(a) fair and reasonable in relation to the circumstances alleged by the complainant; and
(b) still open for acceptance; or
(5) the respondent has reviewed the subject matter of the complaint in accordance with:
(a) the regulatory standards for the review of such transactions prevailing at the time of the review; or
(b) the terms of a scheme order under section 404 of the Act (Schemes for reviewing past business); or
(c) any formal regulatory requirement, standard or guidance published by the FSA or other regulator in respect of that type of complaint;
(including, if appropriate, making an offer of redress to the complainant), unless he considers that they did not address the particular circumstances of the case; or
(6) the subject matter of the complaint has previously been considered or excluded under the Financial Ombudsman Service, or a former scheme (unless material new evidence which the Ombudsman considers likely to affect the outcome has subsequently become available to the complainant); or
(7) the subject matter of the complaint has been dealt with, or is being dealt with, by a comparable independent complaints scheme or dispute-resolution process; or
(8) the subject matter of the complaint has been the subject of court proceedings where there has been a decision on the merits; or
(9) 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) it would be more suitable for the subject matter of the complaint to be dealt with by a court, arbitration or another complaints scheme; or
(11) it is a complaint about the legitimate exercise of a respondent's commercial judgment; or
(12) it is a complaint about employment matters from an employee or employees of a respondent; or
(13) it is a complaint about investment performance; or
(14) it is a complaint about a respondent's decision when exercising a discretion under a will or private trust; or
(15) it is a complaint about a respondent's failure to consult beneficiaries before exercising a discretion under a will or private trust, where there is no legal obligation to consult; or
(16) it is a complaint which:
(a) involves (or might involve) more than one eligible complainant; and
(b) 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) there are other compelling reasons why it is inappropriate for the complaint to be dealt with under the Financial Ombudsman Service.

Test cases

DISP 3.3.5

handbook-rule
The Ombudsman may dismiss a complaint without considering its merits, so that a court may consider it as a test case, if:
(1) before he has made a determination, he has received in writing from the respondent:
(a) a detailed statement of how and why, in the respondent's opinion, the complaint raises an important or novel point of law with significant consequences; and
(b) an undertaking in favour of the complainant that, if the complainant or the respondent commences court proceedings against the other in respect of the complaint in any court in the United Kingdom within six months of the complaint being dismissed, the respondent will: pay the complainant's reasonable costs and disbursements (to be assessed if not agreed on an indemnity basis) in connection with the proceedings at first instance and any subsequent appeal proceedings brought by the respondent; and make interim payments on account of such costs if and to the extent that it appears reasonable to do so; and
(2) the Ombudsman considers that the complaint:
(a) raises an important or novel point of law, which has important consequences; and
(b) would more suitably be dealt with by a court as a test case.

DISP 3.3.6

handbook-guidance
Factors the Ombudsman may take into account in considering whether to dismiss a complaint so that it may be the subject of a test case in court include (but are not limited to):
(1) whether the point of law is central to the outcome of the dispute;
(2) how important or novel the point of law is in the context of the dispute;
(3) the significance of the consequences of the dispute for the business of the respondent (or respondents in that sector) or for its (or their) customers;
(4) the amount at stake in the dispute;
(5) the remedies that a court could impose;
(6) any representations made by the respondent or the complainant; and
(7) the stage already reached in consideration of the dispute.

DISP 3.4

Referring a complaint to another complaints scheme

DISP 3.4.1

handbook-rule
The Ombudsman may refer a complaint to another complaints scheme where:
(1) he considers that it would be more suitable for the matter to be determined by that scheme; and
(2) the complainant consents to the referral.

DISP 3.5

Resolution of complaints by the Ombudsman

DISP 3.5.1

handbook-rule
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.

DISP 3.5.2

handbook-guidance
The Ombudsman may inform the complainant that it might be appropriate to complain against some other respondent.

DISP 3.5.3

handbook-guidance
Where two or more complaints from one complainant relate to connected circumstances, the Ombudsman may investigate them together, but will issue separate provisional assessments and determinations in respect of each respondent.

DISP 3.5.4

handbook-rule
If the Ombudsman decides that an investigation is necessary, he will then:
(1) ensure both parties have been given an opportunity of making representations;
(2) send both 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 that time limit, proceed to determination.

Hearings

DISP 3.5.5

handbook-rule
If the Ombudsman 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 take part in a hearing. A hearing may be held by any means which the Ombudsman considers appropriate in the circumstances, including by telephone. No hearing will be held after the Ombudsman has determined the complaint.

DISP 3.5.6

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

DISP 3.5.7

handbook-guidance
In deciding whether 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.
  • 06/04/2008

Evidence

DISP 3.5.8

handbook-rule
The Ombudsman may give directions as to:
(1) the issues on which evidence is required;
(2) the extent to which evidence should be oral or written; and
(3) the way in which evidence should be presented.
  • 06/04/2008

DISP 3.5.9

handbook-rule
The Ombudsman may:
(1) exclude evidence that would otherwise be admissible in a court or include evidence that would not be admissible in a court;
(2) accept information in confidence (so that only an edited version, summary or description is disclosed to the other party) where he considers it appropriate;
(3) reach a decision on the basis of what has been supplied and take account of the failure by a party to provide information requested; and
(4) dismiss a complaint if a complainant fails to supply requested information.
  • 06/04/2008

DISP 3.5.10

handbook-guidance
Evidence which the Ombudsman may accept in confidence includes confidential evidence about third parties and security information.
  • 06/04/2008

DISP 3.5.11

handbook-guidance
The Ombudsman has the power to require a party to provide evidence. Failure to comply with the request can be dealt with by the court.
  • 06/04/2008

DISP 3.5.12

handbook-guidance
The Ombudsman may take into account evidence from third parties, including (but not limited to) the FSA , other regulators, experts in industry matters and experts in consumer matters.
  • 06/04/2008

Procedural time limits

DISP 3.5.13

handbook-rule
The Ombudsman may fix (and extend) time limits for any aspect of the consideration of a complaint by the Financial Ombudsman Service.
  • 06/04/2008

DISP 3.5.14

handbook-rule
If a respondent fails to comply with a time limit, the Ombudsman may:
(1) proceed with consideration of the complaint; and
(2) include provision for any material distress or material inconvenience caused by that failure in any award which he decides to make.
  • 06/04/2008

DISP 3.5.15

handbook-rule
If a complainant fails to comply with a time limit, the Ombudsman may:
(1) proceed with consideration of the complaint; or
(2) dismiss the complaint.
  • 06/04/2008

DISP 3.6

Determination by the Ombudsman

Fair and reasonable

DISP 3.6.1

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

DISP 3.6.2

handbook-guidance
Section 228 of the Act sets the 'fair and reasonable' test for the Compulsory Jurisdiction and the Consumer Credit Jurisdiction and DISP 3.6.1 R extends it to the Voluntary Jurisdiction.

DISP 3.6.3

handbook-guidance
Where a complainant makes complaints against more than one respondent in respect of connected circumstances, the Ombudsman may determine that the respondents must contribute towards the overall award in the proportion that the Ombudsman considers appropriate.

DISP 3.6.4

handbook-rule
In considering what is fair and reasonable in all the circumstances of the case, the Ombudsman will take into account:
(1) relevant:
(a) law and regulations;
(b) regulators' rules, guidance and standards;
(c) codes of practice; and
(2) (where appropriate) what he considers to have been good industry practice at the relevant time.
  • 06/04/2008

DISP 3.6.5

handbook-guidance
Where the Ombudsman is determining what is fair and reasonable in all the circumstances of a relevant new complaint or a relevant transitional complaint, the Ombudsman Transitional Order and the Mortgage and General Insurance Complaints Transitional Order require him to take into account what determination the former Ombudsman might have been expected to reach in relation to an equivalent complaint dealt with under the former scheme in question immediately before the relevant transitional order came into effect.
  • 06/04/2008

The Ombudsman's determination

DISP 3.6.6

handbook-rule
When the Ombudsman has determined a complaint:
(1) the Ombudsman will give both parties a signed written statement of the determination, giving the reasons for it;
(2) the statement will require 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 that time limit, it is final and binding on both parties;
(4) if the complainant does not notify the Ombudsman that he accepts the determination within that time limit, the complainant will be treated as having rejected the determination, and neither party will be bound by it; and
(5) the Ombudsman will notify the respondent of the outcome.
  • 06/04/2008

DISP 3.7

Awards by the Ombudsman

DISP 3.7.1

handbook-rule
Where a complaint is determined in favour of the complainant, the Ombudsman's determination may include one or more of the following:
(1) a money award against the respondent; or
(2) an interest award against the respondent; or
(3) a costs award against the respondent; or
(4) a direction to the respondent.

Money awards

DISP 3.7.2

handbook-rule
A money award may be such amount as the Ombudsman considers to be fair compensation for one or more of the following:
(1) financial loss (including consequential or prospective loss); or
(2) pain and suffering; or
(3) damage to reputation; or
(4) distress or inconvenience;
whether or not a court would award compensation.

DISP 3.7.3

handbook-guidance
Where the Ombudsman is determining what amount (if any) constitutes fair compensation as a money award in relation to a relevant new complaint or a relevant transitional complaint, the Ombudsman Transitional Order and the Mortgages and General Insurance Complaints Transitional Order require him 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 the relevant transitional order came into effect.
  • 06/04/2008

DISP 3.7.4

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

DISP 3.7.5

handbook-guidance
For the purpose of calculating the maximum money award, the following are excluded:
(1) any interest awarded on the amount payable under a money award;
(2) any costs awarded; and
(3) any interest awarded on costs.
  • 06/04/2008

DISP 3.7.6

handbook-guidance
If the Ombudsman considers that fair compensation requires payment of a larger amount, he may recommend that the respondent pays the complainant the balance.

DISP 3.7.7

handbook-rule
The Ombudsman will maintain a register of each money award.
  • 06/04/2008

Interest awards

DISP 3.7.8

handbook-rule
An interest award may provide for the amount payable under the money award to bear interest at a rate and as from a date specified in the award.

Costs awards

DISP 3.7.9

handbook-rule
A costs award may:
(1) be such amount as the Ombudsman considers to be fair, to cover some or all of the costs which were reasonably incurred by the complainant in respect of the complaint; and
(2) include interest on that amount at a rate and as from a date specified in the award.
  • 06/04/2008

DISP 3.7.10

handbook-guidance
In most cases complainants should not need to have professional advisers to bring complaints to the Financial Ombudsman Service, so awards of costs are unlikely to be common.
  • 06/04/2008

Directions

DISP 3.7.11

handbook-rule
A direction may require the respondent to 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).

Complying with awards and settlements

DISP 3.7.12

handbook-rule
A respondent must comply promptly with:
(1) any award or direction made by the Ombudsman; and
(2) any settlement which it agrees at an earlier stage of the procedures.
  • 06/04/2008

DISP 3.7.13

handbook-guidance
Under the Act, a complainant can enforce through the courts a money award registered by the Ombudsman or a direction made by the Ombudsman.
  • 06/04/2008

DISP 3.8

Dealing with information

DISP 3.8.1

handbook-rule
In dealing with information received in relation to the consideration of a complaint, the Financial Ombudsman Service will have regard to the parties' rights of privacy.

DISP 3.8.2B

handbook-rule
This does not prevent the Ombudsman disclosing information:
(1) to the extent that he is required or authorised to do so by law; or
(2) to the parties to the complaint; or
(3) in his determination; or
(4) at a hearing in connection with the complaint.
  • 06/04/2008

DISP 3.8.3

handbook-rule
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.

DISP 3.9

Delegation of the Ombudsman's powers

DISP 3.9.1A

handbook-rule
The Ombudsman may designate members of the staff of FOS Ltd to exercise any of the powers of the Ombudsman relating to the consideration of a complaint apart from the powers to:
(1) determine a complaint; or
(2) authorise the disclosure of information to the FSA or any other body exercising regulatory or statutory functions.
  • 06/04/2008

DISP 3.9.2

handbook-guidance
In DISP 2 to DISP 4 any reference to "the Ombudsman" includes a reference to any member of the staff of FOS Ltd to whom the exercise of any of the powers of the Ombudsman has been delegated.

Export chapter as

DISP 4

Standard terms

DISP 4.1

Purpose and application

Purpose

DISP 4.1.1

handbook-guidance
The purpose of this chapter is to set out how complaints against VJ participants are dealt with under the Voluntary Jurisdiction.

Application

DISP 4.1.2

handbook-guidance
These standard terms apply to any business which has agreed to be a VJ participant.

DISP 4.2

Standard terms

DISP 4.2.1

handbook-rule
A VJ participant is subject to these standard terms, which may be amended or supplemented by the Financial Ombudsman Service with the approval of the FSA .

DISP 4.2.2

handbook-rule
By agreeing to participate, a VJ participant also agrees that the Voluntary Jurisdiction covers an act or omission that occurred before the VJ participant was participating in the Voluntary Jurisdiction, whether the act or omission occurred before or after commencement.

Application of DISP 1 to DISP 3

DISP 4.2.3

handbook-rule
The following rules and guidance apply to VJ participants as part of the standard terms, except where the context requires otherwise:
(1) DISP 1 (Treating complainants fairly), except:
(a) DISP 1.9 (Complaints record rule);
(b) DISP 1.10 (Complaints reporting rules); and
(c) DISP 1.11 (Lloyd's);
(2) DISP 2 (Jurisdiction of the Financial Ombudsman Service), except:
(a) DISP 2.3 (Compulsory Jurisdiction); and
(b) DISP 2.4 (Consumer Credit Jurisdiction); and
(3) DISP 3 (Complaint handling procedures of the Financial Ombudsman Service).

Determinations and awards

DISP 4.2.4

handbook-rule
The Ombudsman has the same powers to make determinations and awards under the Voluntary Jurisdiction as he has under the Compulsory Jurisdiction (see DISP 3.7 (Awards by the Ombudsman)).

DISP 4.2.5

handbook-rule
If the complainant accepts the Ombudsman's determination within the time limit specified by the Ombudsman, the determination will be binding on the VJ Participant and may be enforced in court by the complainant.

DISP 4.2.6

handbook-rule
The following rules in FEES apply to VJ participants as part of the standard terms, but substituting 'VJ participant' for 'firm':
(1) FEES 2.2.1 R (late payment) but substituting 'FOS Ltd' for 'the FSA';
(2) FEES 2.3.1 R and 2.3.2 R (remission of fees);
(3) FEES 4.2.6 R (1)(b) (periodic fees);
(4) FEES 5.3.6 R (general levy) but substituting:
(a) 'Voluntary Jurisdiction' for 'Compulsory Jurisdiction'; and
(b) 'FOS Ltd' for 'the FSA';
(5) FEES 5.3.8 R (calculation of general levy) but substituting 'part 4' for 'part 2';
(6) FEES 5.4.1 R (information) but substituting:
(a) 'FOS Ltd' for 'the FSA'; and
(b) 'part 4' for 'part 2';
(7) FEES 5.5.1 R (standard case fee); but substituting 'part 4' for 'part 3';
(8) FEES 5.5.6 R (special case fee);
(9) FEES 5.5.15 R (case fee exemption);
(10) FEES 5.7.1 R , 5.7.2 R to 5.7.4 R(payment) but substituting, in FEES 5.7.1 R, 'FOS Ltd' for ' the FSA';
(11) FEES 5.8.1 R (joining the Financial Ombudsman Service); and
(12) FEES 5 Annex 1 R (fees payable).

Withdrawal from participation

DISP 4.2.7

handbook-rule
A VJ participant may not withdraw from the Voluntary Jurisdiction unless:
(1) the VJ participant has submitted to FOS Ltd a written plan for:
(a) notifying its existing customers of its intention to withdraw; and
(b) handling complaints against it before its withdrawal;
(2) the VJ participant has paid the general levy for the year in which it withdraws and any other fees payable; and
(3) FOS Ltd has approved in writing both the VJ Participant's plan and the date of withdrawal (which must be at least six months from the date of the approval of the plan).

Exemption from liability

DISP 4.2.8

handbook-rule
None of the following is to be liable in damages for anything done or omitted to be done in the discharge (or purported discharge) of any functions in connection with the Voluntary Jurisdiction:
(1) FOS Ltd;
(2) any member of its governing body;
(3) any member of its staff;
(4) any person acting as an Ombudsman for the purposes of the Financial Ombudsman Service;
except where:
(5) the act or omission is shown to have been in bad faith; or
(6) it would prevent an award of damages being 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.

Export chapter as

DISP 5

Funding Rules

DISP 5.1

[deleted: provisions relating to the funding rules for the Financial Ombudsman Service are set out in FEES 5 (Financial Ombudsman Service Funding).]

DISP 5.2

[deleted: provisions relating to the funding rules for the Financial Ombudsman Service are set out in FEES 5 (Financial Ombudsman Service Funding).]

DISP 5.3

[deleted: provisions relating to the funding rules for the Financial Ombudsman Service are set out in FEES 5 (Financial Ombudsman Service Funding).]

DISP 5.4

[deleted: provisions relating to the funding rules for the Financial Ombudsman Service are set out in FEES 5 (Financial Ombudsman Service Funding).]

DISP 5.5

[deleted: provisions relating to the funding rules for the Financial Ombudsman Service are set out in FEES 5 (Financial Ombudsman Service Funding).]

DISP 5.6

[deleted: provisions relating to the funding rules for the Financial Ombudsman Service are set out in FEES 5 (Financial Ombudsman Service Funding).]

DISP 5.7

[deleted: provisions relating to the funding rules for the Financial Ombudsman Service are set out in FEES 5 (Financial Ombudsman Service Funding).]

DISP 5.8

[deleted: provisions relating to the funding rules for the Financial Ombudsman Service are set out in FEES 5 (Financial Ombudsman Service Funding).]

DISP 5.9

[deleted: provisions relating to the funding rules for the Financial Ombudsman Service are set out in FEES 5 (Financial Ombudsman Service Funding).]

DISP 5.10

[deleted: provisions relating to the funding rules for the Financial Ombudsman Service are set out in FEES 5 (Financial Ombudsman Service Funding).]

DISP 5 Annex 1R

[deleted: provisions relating to the funding rules for the Financial Ombudsman Service are set out in FEES 5 (Financial Ombudsman Service Funding)]

Export chapter as

DISP App 1

Handling Mortgage Endowment Complaints

DISP App 1.1

Introduction

DISP App 1.1.1

handbook-guidance
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.

DISP App 1.1.2

handbook-guidance
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.

DISP App 1.1.3

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

DISP App 1.1.4

handbook-guidance
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.

DISP App 1.1.5

handbook-guidance
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).

DISP App 1.1.6

handbook-guidance
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.

DISP App 1.1.7

handbook-guidance
If it is concluded that the complainant would have acted differently, the firm should proceed to assess any direct or consequential loss.
  • 06/04/2008

DISP App 1.1.8

handbook-guidance
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.
  • 06/04/2008

DISP App 1.2

The standard approach to redress

DISP App 1.2.1

handbook-guidance
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.

DISP App 1.2.2

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

DISP App 1.2.3

handbook-guidance
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.

DISP App 1.2.4

handbook-guidance
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.
  • 06/04/2008

DISP App 1.2.5

handbook-guidance
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 1.3). 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.
  • 06/04/2008

DISP App 1.2.6

handbook-guidance
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.
  • 06/04/2008

DISP App 1.2.7

handbook-guidance
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.
  • 06/04/2008

DISP App 1.2.8

handbook-guidance
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.
  • 06/04/2008

DISP App 1.2.9

handbook-guidance
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 1.2.7 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.
  • 06/04/2008

DISP App 1.2.10

handbook-guidance
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.
  • 06/04/2008

DISP App 1.2.11

handbook-guidance
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.
  • 06/04/2008

DISP App 1.2.12

handbook-guidance
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.
  • 06/04/2008

DISP App 1.2.13

handbook-guidance
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 1.2.8 G and DISP App 1.2.9 G.
  • 06/04/2008

DISP App 1.2.14

handbook-guidance
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.
  • 06/04/2008

DISP App 1.2.15

handbook-guidance
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.
  • 06/04/2008

DISP App 1.2.16

handbook-guidance
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 1.3.
  • 06/04/2008

DISP App 1.2.17

handbook-guidance
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.)
  • 06/04/2008

DISP App 1.2.18

handbook-guidance
Table of examples of typical redress calculations
  • 06/04/2008

DISP App 1.2.19

handbook-guidance
Example 1
  • 06/04/2008

DISP App 1.2.20

handbook-guidance
Example 2
  • 06/04/2008

DISP App 1.2.21

handbook-guidance
Example 3
  • 06/04/2008

DISP App 1.2.22

handbook-guidance
Example 4
  • 06/04/2008

DISP App 1.2.23

handbook-guidance
Example 5
  • 06/04/2008

DISP App 1.2.24

handbook-guidance
Example 6
  • 06/04/2008

DISP App 1.2.25

handbook-guidance
Example 7
  • 06/04/2008

Interest rates

DISP App 1.2.26

handbook-guidance
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.
  • 06/04/2008

Life cover

DISP App 1.2.27

handbook-guidance
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.
  • 06/04/2008

DISP App 1.2.28

handbook-guidance
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.
  • 06/04/2008

DISP App 1.3

Remortgaging

DISP App 1.3.1

handbook-guidance
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.

DISP App 1.3.2

handbook-guidance
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.
  • 06/04/2008

DISP App 1.3.3

handbook-guidance
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.
  • 06/04/2008

DISP App 1.3.4

handbook-guidance
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.
  • 06/04/2008

DISP App 1.3.5

handbook-guidance
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.
  • 06/04/2008

DISP App 1.3.6

handbook-guidance
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.
  • 06/04/2008

DISP App 1.3.7

handbook-guidance
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.
  • 06/04/2008

DISP App 1.3.8

handbook-guidance
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.
  • 06/04/2008

DISP App 1.3.9

handbook-guidance
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.
  • 06/04/2008

DISP App 1.3.10

handbook-guidance
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.
  • 06/04/2008

DISP App 1.3.11

handbook-guidance
Example of assessment set out at 1.3.10
  • 06/04/2008

DISP App 1.4

Policy reconstruction

DISP App 1.4.1

handbook-guidance
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.

DISP App 1.4.2

handbook-guidance
Two sets of circumstances are examined at DISP App 1.4.3 G to DISP App 1.4.13 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 1.2.
  • 06/04/2008

Case 1

DISP App 1.4.3

handbook-guidance


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.
  • 06/04/2008

DISP App 1.4.4

handbook-guidance
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 1.2, as to the circumstances in which this will be appropriate, will be relevant here.
  • 06/04/2008

DISP App 1.4.5

handbook-guidance
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.
  • 06/04/2008

DISP App 1.4.6

handbook-guidance
Firms should consider whether the reconstruction would have tax implications for complainants (see DISP App 1.5.8 G and DISP App 1.5.9 G).
  • 06/04/2008

DISP App 1.4.7

handbook-guidance
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.
  • 06/04/2008

DISP App 1.4.8

handbook-guidance
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.
  • 06/04/2008

DISP App 1.4.9

handbook-guidance
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.
  • 06/04/2008

Case 2

DISP App 1.4.10

handbook-guidance


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.
  • 06/04/2008

Mismatched loans and policy terms

DISP App 1.4.11

handbook-guidance


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.
  • 06/04/2008

DISP App 1.4.12

handbook-guidance
In these circumstances the guidance given elsewhere in DISP App 1.4 will apply as appropriate.
  • 06/04/2008

Examples

DISP App 1.4.13

handbook-guidance


The following examples illustrate the approach to redress as described in this section.
  • 06/04/2008

DISP App 1.4.14

handbook-guidance
Example 8
  • 06/04/2008

DISP App 1.4.15

handbook-guidance
Example 9
  • 06/04/2008

DISP App 1.5

Additional considerations

Introduction

DISP App 1.5.1

handbook-guidance
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.

Continuing life cover and other policy benefits

DISP App 1.5.2

handbook-guidance
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.

DISP App 1.5.3

handbook-guidance
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.

DISP App 1.5.4

handbook-guidance
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 1.2.4 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.

DISP App 1.5.5

handbook-guidance
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.
  • 06/04/2008

DISP App 1.5.6

handbook-guidance
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.
  • 06/04/2008

DISP App 1.5.7

handbook-guidance
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.
  • 06/04/2008

Taxation

DISP App 1.5.8

handbook-guidance
Firms will need to consider the likely taxation implications for complainants if policies are surrendered or reconstructed, or any form of underpinning or guarantee is given.
  • 06/04/2008

DISP App 1.5.9

handbook-guidance
If there is 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, and make payment on production of appropriate evidence of the liability and payment having been made.
  • 06/04/2008

"Underpinning"

DISP App 1.5.10

handbook-guidance
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 1.5.8 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.
  • 06/04/2008

Reference to the guidance in firms' complaints settlement letters

DISP App 1.5.11

handbook-guidance
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.
  • 06/04/2008

DISP App 1.5.12

handbook-guidance
A statement under DISP App 1.5.11 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.
  • 06/04/2008

Identification of windfall benefits

DISP App 1.5.13

handbook-guidance
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.
  • 06/04/2008

DISP App 1.5.14

handbook-guidance
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 1.5.15 G (below).
  • 06/04/2008

DISP App 1.5.15

handbook-guidance
'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.)
  • 06/04/2008

DISP App 1.5.16

handbook-guidance
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 1.5.15 G. Whether additional bonuses and policy enhancements on a demutualisation are relevant benefits should be determined by applying the test in DISP App 1.5.15 G to each benefit.
  • 06/04/2008

DISP App 1.5.17

handbook-guidance
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.
  • 06/04/2008

DISP App 1.5.18

handbook-guidance
Firms should not normally bring windfall benefits which are relevant benefits (as defined in DISP App 1.5.14 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.
  • 06/04/2008

DISP App 1.5.19

handbook-guidance
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.
  • 06/04/2008

DISP App 1.5.20

handbook-guidance
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.
  • 06/04/2008

DISP App 1.5.21

handbook-guidance
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.
  • 06/04/2008

DISP App 1.6

Valuing Relevant Benefits

DISP App 1.6.1

handbook-guidance
If, exceptionally under the guidance at DISP App 1.5.13 G to DISP App 1.5.21 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.

DISP App 1.6.2

handbook-guidance
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.

DISP App 1.6.3

handbook-guidance
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 report produced by an actuary appointed under SUP 4 (Actuaries) 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.
  • 06/04/2008

DISP App 1.6.4

handbook-guidance
The method of valuation adopted should treat the complainant fairly overall.
  • 06/04/2008

DISP App 1.6.5

handbook-guidance
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.
  • 06/04/2008

DISP App 1.6.6

handbook-guidance
A simplified approach should treat the complainants fairly overall.
  • 06/04/2008

DISP App 1.6.7

handbook-guidance
An actuary, appointed by a product provider under SUP 4 (Actuaries) 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 1.6.1 G to DISP App 1.6.6 G.
  • 06/04/2008

Implementation

DISP App 1.6.8

handbook-guidance
The principles set out above (in DISP App 1.6.1 G to DISP App 1.6.7 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.
  • 06/04/2008

DISP App 1.6.9

handbook-guidance
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.
  • 06/04/2008

DISP App 1.6.10

handbook-guidance
There may be some circumstances in which the policy will not be surrendered (see DISP App 1.2.15 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.
  • 06/04/2008

DISP App 1.6.11

handbook-guidance
Firms are entitled to mitigate losses by making use of the Traded Endowment Policy (TEP) market (see DISP App 1.3.8 G to DISP App 1.3.10 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.
  • 06/04/2008

DISP App 1.6.12

handbook-guidance
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 1.3.10 G).
  • 06/04/2008

DISP App 1.6.13

handbook-guidance
There may be circumstances in which a policy needs to be reconstructed (see DISP App 1.4). 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 1.4.8 G.
  • 06/04/2008

DISP App 1.6.14

handbook-guidance
DISP App 1.5.10 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.
  • 06/04/2008

DISP App 1.6.15

handbook-guidance
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.
  • 06/04/2008

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Transitional Provisions and Schedules

DISP TP 1

Transitional provisions

DISP TP 1.1

Transitional Provisions table

DISP TP 1.2

Table Fee tariffs for industry blocks

DISP TP 1.3

DISP Sch 1

Record keeping requirements

  • 01/12/2004

DISP Sch 1.1

handbook-guidance
  • 01/12/2004

DISP Sch 1.2

handbook-guidance

DISP Sch 2

Notification requirements

  • 01/12/2004

DISP Sch 2.1

handbook-guidance
  • 01/04/2002

DISP Sch 2.1

handbook-guidance

DISP Sch 3

Fees and other required payment

  • 01/12/2004

DISP Sch 3.1

handbook-guidance

DISP Sch 3.2

handbook-guidance

DISP Sch 4

Powers Exercised

  • 01/12/2004

DISP Sch 4.1

handbook-guidance

DISP Sch 4.2

handbook-guidance

DISP Sch 5

Actions for damages for contravention under section 150 of the Act

  • 01/12/2004

DISP Sch 5.1

handbook-guidance
  • 01/12/2004

DISP Sch 5.2

handbook-guidance

DISP Sch 6

Rules that can be waived

  • 01/12/2004

DISP Sch 6.1

handbook-guidance

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