Complaints

Under the various Codes of Conduct fiduciaries have had to record, investigate and, as appropriate, act on complaints. Most of the business carried out by fiduciaries in Guernsey does not fall within the remit of the Channel Islands Financial Ombudsman (CIFO) as, apart from fiduciaries who carry out regulated activities in relation to a pension scheme, fiduciaries are not “relevant financial services businesses” whose customers are subject to CIFO’s requirements.

The Fiduciary Rules introduce some straightforward requirements on all fiduciaries regarding the treatment of complaints and complaint-handling processes that must apply to all of their clients.

What is a complaint?

The Rules use a fairly standard definition of a complaint:

“Any oral or written expression of dissatisfaction, whether justified or not, from or on behalf of a person about the provision, or failure to provide a financial service in respect of regulated activities which alleges that the complainant has suffered, or may suffer, financial loss, material distress or material inconvenience”

They also define “significant complaints”:

“A complaint alleging a breach of the Law, mala fides, malpractice or impropriety, or repetition or recurrence of a matter previously complained of (whether significant or otherwise)”

What’s new?

Under the new Rules fiduciaries have explicit obligations:

• to have a written procedure for the effective consideration and fair, proper and timely handling of complaints

• to establish a complaints log

• to inform complainants about the progress of complaints (unless this is prohibited by their duties under law or conflicts with your other duties)

• to outline to complainants the GFSC notification requirements which the firm has to meet in respect of “significant complaints” and any complaint unresolved after three months

• to tell complainants when you consider the complaint closed

• to state the reason for rejecting the complaint if they do not uphold the complaint.

For closed complaints fiduciaries must retain the following records:

• Details of the nature of the complaint

• The reason the complaint was closed

• Details of agreed compensation (if any)

Easy bits

• Establishing a written complaints policy should be straightforward. Although CIFO does not apply to most fiduciary complaints a good starting point for drafting complaints procedures is the CIFO Model Complaint-Handling Procedure which can be adapted to suit fiduciaries’ requirements (see here). Those fiduciaries dealing with pensions, so already within the scope of CIFO, will already have a complaints-handling procedure in place. Any existing non-pensions procedures will need some redrafting.

• Complaints logs are generally in place. These should include some form of aging analysis in the log so you can highlight when a complaint is outstanding for longer than three months and should identify whether the complaint is “significant” or not and therefore needs reporting to GFSC.

Tricky bits

• Fiduciaries with a pensions authorisation will need to decide whether to extend their CIFO-compliant procedures, which are appropriate for retail clients and therefore heavy for the firm, to all complaints, or to exclude some CIFO aspects as being unnecessary for non-pension activity

• Staff will probably need some training in complaints and complaint-handling. It is common for staff to under report complaints. For example, they might be reluctant to record an oral expression of dissatisfaction (justified or not) about your services which a client says has caused them material stress or inconvenience. What is “material inconvenience”? When does a question about fees turn into an expression of dissatisfaction? Management and staff need to be trained so they interpret complaints appropriately and consistently.

• Considering a complaint closed can also be difficult. Firms may have a set “cut off” after which time if no response has been received as complaint can be considered closed. What if that period of time means the complaint triggers the three-month notification Rule? How should complaints be reactivated if complainants respond after the cut off time? Your policies and procedures should make your approach clear.

• Your procedures should set out who will deal with complaints and at what level. The person being complained against should not investigate the complaint so you need provisions for alternatives in case the normal route for complaint-handling involves a subject of the complaint.

• Record keeping of complaints needs to be carefully managed to ensure the Rules are complied with. Data protection requirements also need to be carefully managed to balance the minimum 6 year retention required by Rule 2.6.4 against the data protection principle of storage limitation.