Financial Services Ombudsman Australia – See Senators asking questions to ASIC about Dispute Assists submission to a parliamentary inquiry that the Financial Ombudsman Service made misleading file notes and who investigates the Financial Ombudsman Service in cases such as this. The answer – apparently the Financial Ombudsman service investigates itself!!!!!
Read excerpt or see link below of Parliamentary Joint Committee on Corporations and Financial Services – 16/03/2016 – Oversight of the Australian Securities and Investments Commission and the Takeovers Panel:
Senator O’NEILL: But you can kind of see where that ballpark figure has potentially come from?
Ms Armour : Yes.
Senator O’NEILL: If you want to provide a more detailed response on notice, that would be helpful. What powers does ASIC have to investigate ASIC-approved dispute resolution schemes like the Financial Ombudsman Service?
Mr Kell : To investigate?
Senator O’NEILL: Yes.
Mr Kell : We do not investigate an approved financial—
Senator O’NEILL: You just oversee it?
Mr Kell : We initially approve the scheme against the standards that we set out in our policy. As part of that approval, there is a requirement to undertake regular independent reviews, which ASIC has a significant role in, in terms of consultation on the terms of reference for those reviews, looking at who undertakes them, looking at the recommendations and showing that they are implemented. I suppose that, ultimately, if it was the case that a scheme was completely failing, we would potentially be in a position to withdraw approval, but that is not something, thankfully, that has been on the cards with the two schemes in existence.
Senator O’NEILL: When you say ‘regular’, what does that mean?
Mr Kell : As in, ‘regular reviews’?
Senator O’NEILL: Yes.
Mr Tanzer : I think it is every three years. It is three or five—it is a period of years.
Mr Kell : Plus, there is a requirement for those schemes to report to us, and they are happy to do so. On complaints data, they need to report systemic issues to us.
Senator O’NEILL: Is that annually?
Mr Kell : With systemic issues, that occurs when and if they arise. It might be a systemic issue across an industry sector. It might be a systemic issue in relation to an individual firm where you get, say, multiple complaints or an issue that is clearly going to affect a large number of consumers. There is a requirement to do that. We have a very close relationship with those bodies, because they are so critical in the Australian context, when it comes to dealing with large numbers of individual consumer disputes.
Senator O’NEILL: Has ASIC received any complaints about misconduct by the Financial Ombudsman Service?
Mr Kell : I am not sure that ‘misconduct’ is the term I would use. Do we receive complaints about decisions and outcomes? Yes, we do receive complaints from both consumer and industry participants about outcomes. Obviously these tend to be, in my experience, exclusively when those parties have been on the side that has not been successful, but we receive complaints both from consumers, at times, and from industry participants. There is the ability for consumers to take the matter further, if they have the capacity to go to court. There is also the ability for industry participants to, at times, take the matter further. My understanding is that the FOS has generally been successful in those matters, when they have been challenged.
Senator O’NEILL: Have you had any claims of misleading file notes put to you?
Mr Day : Misleading file notes in what context?
Senator O’NEILL: In terms of the Financial Ombudsman Service.
Mr Day : That they have kept misleading file notes?
Senator O’NEILL: Yes.
Mr Kell : We did provide some extensive information—sorry; I do not have it in front of me—about a recent case where there were some allegations about misleading file notes. If it is the case I am thinking of, I should take it on notice and provide you with the answer that we provided to Senator Xenophon. It would be good to know which case, because, if it is the case I am thinking about, we have provided some information and I am very happy to provide it to you as well.
Senator O’NEILL: I would be interested to find out about any claims of misleading file notes made to you, and what ASIC has done to investigate those claims.
Mr Kell : I am only aware of one matter, and it was a matter that was also litigated in the Supreme Court of Victoria, where the court found comprehensively in favour of FOS. That is the only matter that I can think of off the top of my head.
Senator O’NEILL: Okay.
Mr Day : It sounds like there is a little bit more behind that question, and it is very hard to answer the question without a little bit more detail. I am saying that with the utmost respect. It is not the normal thing that people would raise, because those things normally do not get reviewed. We do not investigate FOS per se in that respect. We oversee their external dispute resolution activities and schemes but we do not investigate matters by matter. But, if something of that nature was raised with us through our general liaison and meetings with FOS—as Commissioner Kell said, we have very close discussions with them about those things—those things would be raised.
Senator O’NEILL: In a gentleman’s agreement, conversation type thing?
Mr Day : No, I would reject that outright. That is not the case at all. If people raise—
Senator O’NEILL: If there was something that was raised that was of concern—
Mr Day : If I could just answer that question, because I—
Senator O’NEILL: No, because I want to ask: if there were a genuine concern raised—and this started with my first question—who would do the investigation? I do not mean what you called regular and independent reporting every three to five years. Who is responsible? If something goes wrong, who would do the investigation?
Mr Day : Again, you are saying ‘if something goes wrong’. If someone raises with us a serious allegation about activities, things done or steps taken by FOS, those are things we will discuss and raise with FOS. In a way, we are not in a position to investigate those steps, but we would take them seriously in terms of: what does that mean about their activities in operating that scheme? Those would be very serious discussions. For you to categorise them or to label them as some ‘gentleman’s agreement discussion’—I would reject that. That is not the case. These discussions are where we see problems and we have things raised with us. They are serious discussions where we say, ‘What does this mean?’
Senator O’NEILL: Right. Say you have serious discussions about something—and you are not the investigating body; you are an oversight body that is regular and independent in the way you do that. This is my question again: who would do an investigation?
Mr Day : I would expect that it would be something that the ombudsman himself, potentially, would be personally involved in. But that is a question you would have to raise with the ombudsman.
Senator O’NEILL: So they would investigate themselves?
Mr Day : Yes. They do review their own matters. They review a large number of their own matters about that conduct. That is a very serious allegation. If we were to raise it with the ombudsman, I would expect that the ombudsman himself would take personal consideration of that.
Mr Medcraft : If I could just pick up on the senator’s question, I think we should come back to this, because if we do our three-yearly review, Peter, and we identify issues at FOS, and I think this is where the senator is getting this from, and we see major problems—maybe we need to take it on notice and come back to the senator.
Mr Kell : Yes. It is slightly difficult to have this discussion in the abstract. But I have dealt with FOS over many, many years and I think I am aware of one such allegation out of the hundreds of thousands of matters that go to them. If there are more, it would be very useful for us to hear about them.
Mr Medcraft : The thing that it comes back to is that we do approve of FOS as a scheme—
Mr Kell : Yes, very much so.
Mr Medcraft : and, if there are issues related to FOS, then we would have to really question that and we as ASIC would then have to take action. I think what we should do is come back to you, Senator, and answer that question with more—
Mr Day : When we say a false and misleading file note, that is an allegation. It may be that that is the recollection of the discussion of the person who took the file note. So you get into a very factual debate over someone who says, ‘Hang on. I was involved in that discussion and that’s not my recollection’ and the other person says, ‘Hang on. That’s my recollection.’ And then the other person says, ‘Hang on. I think that’s a false and misleading file note.’ That is a dispute on fact, so does that mean that someone has done something to mislead another party? It is their own file note about those things. That is why, as Commissioner Kell says, in the abstract it is very difficult understand what the facts of it are and how we could respond to that.
Mr Medcraft : We will take it on notice and come back to you about what we can do as the oversight body of FOS and if we identify major issues.
Senator O’NEILL: If it got to a point, who would do the investigation, because it does not make me feel confident? If you investigate yourself, there is a degree of intimacy there that perhaps might not be as transparent as it needs to be.
Mr Medcraft : I expect if there are major problems, we would; and what would we do about it if we found problems?
Mr Kell : If there is any further information you can provide—
Senator KETTER: Can I assist with that in taking this matter on notice. I just googled the submission by an organisation called Dispute Assist to the scrutiny of financial advice inquiry. Dispute Assist is a company that assists in dispute resolution.
Mr Kell : Sure. Senator, maybe just to save time: we provided evidence before the Senate estimates committee in relation to that matter a few weeks ago. We also provided a substantial written response to Senator Xenophon on that matter. I am very happy to provide that to you to illustrate our analysis of the issue, what we did about it and the way that the Supreme Court of Victoria handled that matter.
Senator KETTER: That went to the issue of misleading file notes?
Mr Kell : The court’s decision actually covered that amongst other things.
Mr Medcraft : We will come back to you on that.
Mr Kell : It was a very comprehensive decision in favour of FOS.
Senator KETTER: When was that decision?
Mr Kell : Quite recently—reasonably recently.
Senator O’NEILL: This year?
Mr Kell : I would have to come back to you on that.
Senator KETTER: This submission is dated 18 May 2015. Would it have been post that?
Mr Kell : I would have to check.
Mr Medcraft : We will come back.
Senator O’NEILL: Do you have any concerns about the industry funding model for FOS leading to a conflict in the performance of their duties of the ombudsman’s service?
Mr Kell : I think it is critical that the industry pays for a dispute resolution scheme, ultimately. The funding model works has two elements to it: there is, if you like, a membership fee; and then there is a fee per dispute, which escalates as the dispute goes further through the scheme to, in effect, provide an incentive for the firm to resolve the matter. The scheme is set up in such a way that it actually incentivises firms to resolve matters where possible and where that is reasonable but also provides adequate funding for the overall operation of the scheme, because it is partly based on volume.
Senator O’NEILL: So that answers my last question: you do believe it is adequately funded.
Mr Kell : Can I just say on that: at FOS’s last review, there was a significant issue about a backlog and delays. That was a concern that we had. That was a concern that industry participants had. That was a concern that consumer representatives had. The focus of the last FOS review was to look at how that could be addressed and how that backlog could be worked through. It was partly a result of the volume that came through from the GFC. As a result of implementing the recommendations of that review, the backlog—which obviously is partly around funding but also due to process efficiencies—was eliminated halfway through last year, and there is no longer a backlog. That, for us, was one of the key tests of whether the funding was adequate: whether the backlog itself could be overcome.
Senator O’NEILL: It terms of RG 139, do you believe that FOS is acting in a fair, impartial, efficient and effective manner?
Mr Kell : Yes, that is what the review found and that is our assessment of how FOS operates. The concerns that were raised by FOS in the most recent review did not go to the quality of its decision making. That was certainly one of the issues that was closely looked at, but that was not a concern. The issues that needed to be addressed were really around processes that would deal with the backlog, and it is something that we look at. It is in ASIC’s interest to have the ombudsman schemes delivering good quality decision making. That is ultimately the first thing we look to, and that is what we will continue to monitor in terms of the complaints we get about FOS from different parties and the sorts of outcomes that are there. That is something that we look to over time.
Senator O’NEILL: I would really like to ask some questions about dispute resolution, but they might have to go on notice.
CHAIR: Senator Williams has to leave soon. He has a couple more questions, and I have some more, so can I ask you to put those on notice?
Senator O’NEILL: I will do that. Can I ask one question about Trio?
CHAIR: You can.
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