The FCA’s Sarah Pritchard (Executive Director, Markets), recently delivered a speech announcing the FCA’s intention to undertake a review of the investment advice rules. Whilst the industry might welcome this review, how does this relate to the FOS?
The FOS published its latest complaints figures in September covering the period from January to June 2022, and highlighting the following:
Approx. 73,000 complaints were handled in H1 2022
37% of complaints were upheld in favour of the consumer
44,200 complaints were raised against the banking and credit sector
212 firms had complaints filed against them compared to 216 in H2 2021
No change to the upheld rate between the two periods
The upheld rate could suggest that the FOS has fine tuned its processes to deliver consistency in its investigations and responses to consumers and firms. Not a bad feat considering that the volume of complaints rose steeply during Covid-19. The FOS has responded as best they can and continues to seek improvements to aid faster response times.
How does this relate to investment advice?
Whilst the banking and credit sector has seen the most complaints raised against them, those complaints relating to investments are where we see the highest upheld rate and a steady increase in complaints. A huge 74% of investment complaints were upheld during Q1 2022.
The FOS indicated that investment complaints are the fastest growing type of complaint and cited such facts as:
just over half of the investment complaints are about scams
a large number relate to cryptocurrencies, or
promised investments that did not materialise, or
money was inadvertently paid to fraudsters
Despite the FCA’s well-publicised campaigns, consumers continue to be scammed and deceived by the promise of high returns. These complaints relate to unregulated collective investment schemes (UCIS), and there’s more, as follows:
45% of the UCIS complaints related to unsuitable advice, where people had transferred out of existing pensions into Self-Invested Personal Pension (SIPP) for the purpose of investing in a UCIS
43% of these complaints related to SIPP providers failing to complete proper due diligence on the planned investments, or the businesses providing advice were unregulated.
Other UCIS related complaints focused on administration issues, or investments that have failed, or simply not returned the expected returns.
As required under the FCA rules, firms need to undertake independent investigations of any complaints raised. Firms need to take action to resolve the complaint and where appropriate, put things right.
Under the FOS process, where a customer disagrees with a firm’s response, the customer can raise an issue with the FOS for further investigation. This is where recordkeeping and the ability to retrieve information quickly can help a firm to refute a consumer’s claim. The onus is on the firm to demonstrate that it acted in the customer’s best interests and delivered a good outcome for the customer.
The Ruleguard solution
Ruleguard is an industry-leading software platform designed to help regulated firms manage the burden of evidencing and monitoring compliance. It has a range of tools to help firms fulfil their obligations across the UK, Europe and APAC regions.
The Ruleguard Issue management module is a dedicated software solution for raising and managing compliance risk incidents. The solution allows firms to:
Enter details such as discovery, reporting and resolution dates along with a full description of each item
Specify where a rule has been broken, if necessary specify a rule breach has occurred
Ruleguard's powerful rules-mapping system allows firms to link issues directly to the relevant regulation. It is also possible to link risks, controls, and business processes.
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Contact the author
Head of Client Regulation| Ruleguard