Joe Meade ACOI-March 2009

1. Joe MeadeACOI-March 2009

2. Context • Institutions are dealing with people – ordinary, educated, foolish, elderly or vulnerable – and so are you as compliance officers • Money and maybe ego in many instances involved on both sides • Investment advice challenges can and do arise but how these are dealt with is what is important : the subsequent learning can be of benefit • Satisfaction is wanted by both sides and in the current serious economic downturn investment complaints will arise anyway • Consumers are perceived to be educated and not afraid to complain • Ombudsman is an impartial and independent remedy outside of the court • Complaints can be a positive indicator for business – no one is perfect!!! • Common sense is needed but is it always there? • Your own role as Compliance Officers in all of this is not to be underestimated or undervalued – how are you all coping in present times, increased demands and unexpected and extraordinary events-liaison with auditors?

3. Presentation outline • Ombudsman’s overall role • Trends and nature of investment complaints • What treating customers fairly should mean • Davy judgment - consequences • Case studies and recurring issues • Compliance officers’ valuable role • Recent developments

4. Role of the Financial Services Ombudsman? • The Financial Services Ombudsman is a statutory officer and in operation since 1 April 2005. • He deals independently and impartially with complaints from consumers about their individual dealings with all financial services providers that have not been resolved after going through the internal complaints process. • Ombudsman’s findings are binding subject to an appeal by either party to the High Court- can award compensation up to €250,000 as well as direct that matters be rectified • The Ombudsman is therefore the arbiter of unresolved disputes and is impartial. It is a free service to the complainant and funded by industry statutory levies. • Consumer protection issues are the responsibility of the Financial Regulator-future developments

5. What if financial service providers refuse to cooperate or implement findings? • The Ombudsman has extensive legal powers to require the financial service provider to provide information including the power to require employees to provide information under oath. • If necessary the Ombudsman can enter premises of providers and demand the production of documents etc. • Has access to CCTV; private investigators; phone recordings; sworn affidavits • In the case of non compliance the Ombudsman can seek a Court Order. • Anyone who obstructs the Ombudsman commits an offence and is liable to a fine of up to €2,000, imprisonment for three months or both.

6. What should Financial Service Providers do when a customer complains initially? • Deal with matter quickly and with courtesy • Formalised complaints handling process which is easy to access & all staff should be aware of it. Appropriate to size of organisation • Senior management person responsible for ensuring that the complaints handling process works in a fair and proper manner. • When a complaint cannot be resolved a ‘final response’ letter or a statement to the effect that nothing further can be done should be given to the complainant by the member of senior management. Complainant must also be informed that he/she has a right to complain to the Ombudsman • Compliance officer role here

7. Time Limits for dealing with Ombudsman matters • 14 days for complaint form to be returned by complainant after initial contact • 25 w days for matter to be settled or for final response letter to issue • 15 w days to indicate whether happy or for complaint to proceed • Mediation offered-10 w days • Series of questions and documentation- 20 w days • 10 w days for complainants comments • 5 w days for providers further comments • Finding issued • 21 days for appeal to High Court

8. Complaints to Ombudsman • What can be complained about • What cannot be complained • What can be declined • Who can complain

9. Complaints trends Complaints received since April 2005 Insurance Credit Institutions 2009- Feb 700 500 +37% 2008 3330 2620 + 36% 2007 2445 1929 + 15% 2006 2229 1566 + 14% April 05 – December 051734 870 Pre 2005 613 166 60% +settled to complainants satisfaction; 40% not upheld ; Travel and motor insurance are largest area of complaint followed by life assurance and investments ; Account transactions, mortgages and credit cards are the largest credit institutions complaints 200% plus increase about misselling and investment losses in 2008

10. Evidence or lack of it (such as missing Fact Find, Suitability Letter) is critical when a complaint is being investigated Can the matter complained of be proven or refuted by either of the parties? Anecdotal evidence not sufficient from either party and will the complainants assertions be accepted because he/she has better records? Higher level of proof demanded from providers as IT systems should be robust and reliable Can you prove that all reasonable steps have been taken to resolve the matter before it was referred to the Ombudsman? Can you readily reply within the time limit set by the Ombudsman? Time limits and how critical internal co-operation is in meeting them Are your records robust enough to guarantee you a successful appeal outcome if you or a complainant appeal a decision to the High Court Compliance officers and internal auditors role is of particular importance Records management

11. Ombudsman’s considerations whether people were treated fairly Each case on its individual’s merits but • Was the investment advice appropriate? • Was the product suitable? • What was the liquidity ratio? • Was documentation clear – the Fact Find, Suitability Letter • Did you take advantage of a particular situation - vulnerable person • Did you take advantage of a person’s age – elderly customer procedure observed? • Is the documentation sufficiently comprehensive? • Customer’s understanding of risk? • Was commission more important than needs? • Was complaint dealt with properly and reasonably at all stages? • Were refusals or declining reasons reasonable-I do not do hindsight • Duty of care goes both ways • Would I be happy-or could I defend- if I was the customer who was not properly treated? • Do you as a compliance officer carry out such spot-checks

12. Revised Procedures after Court Judgment in Davy case • Judicial review and under appeal to Supreme Court • Mediation offered to both sides but its not compulsory • Exchange of documents to both sides - NB • Documents and submissions to support your case • Medical matters to a nominated medical professional • Oral hearing under oath • Internal 15 day review of initial finding appeal gone • Revised procedures published on 27 August

13. Mis-selling to elderly customers Customer’s understanding of risk Non disclosure by both sides Product suitability Product affordability – liquidity ratio Customer service post sale Income Protection Disability Value of investment Lost or misplaced title deeds ATM and credit card transactions – chip and pin Recurring complaints

14. Elderly or Vulnerable Customers complaints • Unsuitable products • Time frame of investment • ATM cards and anti fraud measures • Deposit accounts • Senior manager sign off needed • Not all elderly people are ‘naive’ investors

15. Bullying in sale of products Elderly people ; investments and other issues Court cases- Quinn Direct; INBS; Ulster Bank; Davy; people €800,000 death benefit-non disclosure Income Protection and disability Conflicts of interest not disclosed Look backs and Davy settlement - circa + €45m Point of sale responsibility cannot be passed on to product provider Three Investment Bond cases Have you as Compliance Officers noted these findings Case Studies of Interest

16. Compliance Officer’s role • What is your role really and where in the organisation do you fit in • Are you just another administrative cog or an important person • Do you check the following • Records Management • Disclosure • Affordability • Adviser’s file – pre and post • Customer service post sale • Organisational ethics and values – not lip service • Do you ensure that FSO requests are complied with within time • What actions do you take when FSO issues findings or case studies • How long are you in the job-familiarity or inexperience • Does management take you seriously • Staff capability – how do you monitor same • Is everything left to you because in many instances you are not the problem • Do you favour whistle blowing done in good faith- should you be the recipient of blowers, would you protect them from retribution • Do you get that message across to the CEO, Chairperson and Board

17. Conclusion • Ombudsman’s role is well defined and known by now I hope • Treat customers fairly at all times and stages but complaints will arise anyway • Institutions have primary responsibilities but customer has a part to play also • Complaints handling determines how good your organisation is • Training and compliance officers role is a major area • Its not Compliance officer’s job to deal with complaints at first point of contact –its a responsibility of all staff • Cutting down on training-foolish • Compliance officers role is a major one even more so after recent and current happenings • I know when organisations take it seriously

18. Contact Details Financial Services Ombudsman 3rd Floor Lincoln House, Lincoln Place Dublin 2 • Lo Call: 1890 88 20 90Tel: +353 1 6620899Fax: +353 1 6620890 • Public Office Hours09.30hrs - 13.00hrs14.00hrs - 17.00hrs Email enquiries@financialombudsman.ie Website www.financialombudsman.ie