AFA questions FOS operating procedures
The Association of Financial Advisers (AFA) has called into question some of the basic operating procedures of the Financial Ombudsman Service (FOS), stating the service's operations have reduced the level of confidence in the external dispute resolution (EDR) system.
In a submission to the independent review of FOS, the AFA stated that FOS's operating procedures were related to Australian Securities and Investments Commission Regulatory Guide 139 (RG139) which provides oversight of EDRs.
The AFA highlighted a number of areas stemming from RG139 and noted inconsistencies that applied for complainants compared with financial service providers (FSP).
In particular the AFA highlighted that complaints could be made at no-cost to consumers but FSPs had to pay for complaints, even in the event they won the case, and that outcomes of cases were binding on FSPs but not on complainants.
The association also stated that FOS is expected to provide assistance to complainants to draft their complaints — a service not offered to FSPs — while the latter had no avenue of appeal, even in the event where there was a clear error made in the judgement of a case.
The AFA also questioned the level of claims which could be settled by FOS, claiming the increased limit of $280,000 was well beyond the compensation powers of magistrates who were typically limited to award payments of $100,000.
This limit was an important factor given that FOS was not bound by any legal rule of evidence, with the AFA stating it had "taken FOS cases into a space where the industry now questions the level of equity and procedural fairness".
The AFA also stated that under RG139 FOS determinations did not have to be based only on the relevant legal principles but also concepts of fairness and relevant industry best practices, with these structural issues resulting in the level of concern seen by AFA members and within the financial advice industry.
AUTHOR
Jason Spits
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