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ombudsman principles

principle 1: independence, to secure impartiality

Effective approaches to fundamental principles: part 2

 

Independence, to secure impartiality is a fundamental principle

which members should aspire to comply with, so far as it is within their control

 

2.1 A financial services ombudsman scheme is an alternative to the courts. It should be (and also be seen to be) independent and impartial — resolving complaints on their merits, without fear or favour.

 

2.2 The financial services ombudsman scheme should be established so that it is visibly and demonstrably independent of both the financial industry and consumer bodies.

 

2.3 Decision-makers should be free from influence/direction — including free from influence/direction by:

• parties to complaints (and those representing them)

• regulators and governments.

 

Effective approaches

that have worked in some countries, though there may be other ways.

 

Constitution

 

2.4 The independence of the financial services ombudsman scheme is established in law or in a constitution that is approved by a public interest agency.

 

2.5 The parties to complaints are not in a position to exert commercial or other influence over the financial services ombudsman scheme, directly or indirectly.

 

2.6 The financial ombudsman scheme is free to publish reports on its work and on issues that give rise to complaints. (Section 7 on transparency and accountability covers the publication and contents of an annual report.)

 

Resolving complaints

 

2.7 Complaint decisions are made by an ombudsman, or by a decision panel comprising an independent chair and an equal number of industry representatives and consumer representatives.

 

2.8 The ombudsman or a decision panel chair have not worked, in the previous three years, in a financial services business (or an industry association for the sector) covered by the ombudsman scheme. (Section 5 on effectiveness covers experience, expertise and training.)

 

2.9 Only an ombudsman or a decision panel:

• decide whether any complaint is within jurisdiction

• choose the procedure for the resolution of any complaint

• decide/recommend the outcome of any complaint.

 

2.10 A binding decision or non-binding recommendation by an ombudsman or decision panel is not able to be overturned, or is ble to be overturned only by the courts (or a tribunal with equivalent independence and standing).

 

2.11 Any decision-maker discloses any conflict of interest in relation to a complaint, and ceases to be involved in the complaint unless both parties agree.

 

Appointment and terms

 

2.12 A decision-maker is appointed by any of the following which commands public confidence in the relevant country:

• the legislature, the government, the financial regulator(s) or a body that has only public-interest members; or

• a body with balanced membership — for example:

• one third each from the financial services regulator(s), the financial services industry and consumer bodies

• equal numbers from the financial industry and consumer bodies with an independent chair

• a majority are independent members.

 

2.13 The body appointing a decision-maker does not have a majority of industry representatives or a majority of consumer representatives.

 

2.14 Appointments of decision-makers are made by a transparent process, following a public advertisement.

 

2.15 Whoever appoints them, a decision-maker is appointed on terms that secure their independence from:

• the financial services industry and consumer bodies

• the financial services regulator(s) and the government

• those who appointed the decision-maker.

 

2.16 A decision-maker is appointed (or reappointed) for a sufficient term to ensure independence (typically at least five years), and is not removable — except for incapacity, misconduct or other just cause.

 

2.17 Any decision to remove a decision-maker is in the hands of a body that is independent of the financial services industry and independent of consumer bodies.

 

2.18 If a decision-maker can be reappointed, the process does not compromise the decision-maker’s independence and he/she is told the outcome at least one year before the previous term ends.

 

2.19 A decision-maker’s pay is not subject to reduction or suspension, and it is not influenced by the outcome of complaints.

 

Staff and resources

 

2.20 The financial services ombudsman scheme is provided with sufficient resources to cope efficiently with its workload. It operates on a not-for-profit basis.

 

2.21 The funding structure is such that those providing the funds (whether from the public sector or private sector) cannot influence the work of the financial services ombudsman scheme.

 

2.22 The financial services ombudsman scheme is able to select and employ its own staff.

 

Governance body

 

2.23 It may be helpful, but not essential, for the financial services ombudsman scheme to have an independent governance body, to:

• appoint decision-makers

• help safeguard the independence of the decision-makers

• help ensure that the ombudsman scheme has adequate resources to handle its work

• oversee the efficiency and effectiveness of the ombudsman scheme

• advise on the strategic direction of the ombudsman scheme.

 

2.24 Any governance body is not involved in deciding complaints or the day-to-day management of the financial services ombudsman scheme.

 

2.25 Members of any governance body are any of the following which commands public confidence in the relevant country:

• appointed by the legislature, the government, the financial services regulator(s) or a body that has only public-interest members

• a body with balanced membership — for example:

• one third each from the financial services regulator(s), the financial services industry and consumer bodies

• equal numbers from the financial services industry and consumer bodies with an independent chair

• a majority of independent members.

 

2.26 Any governance body does not have a majority of industry representatives or a majority of consumer representatives.

 

2.27 Appointments of members of any governance body are made by a transparent process, following a public advertisement.

 

2.28 Whoever appoints them, the members of the governing body, they are appointed on terms that:

• require them to act in the public interest

• secure their independence from those appointing them.

 

2.29 Any member of any governance body discloses any conflict of interest and ceases to be involved in a discussion or decision.

BACK TO PART 1: INTRODUCTION
FORWARD TO PART 3: CLARITY OF SCOPE AND POWERS

 

 

 

 

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