New objectives and regulatory principles Financial Ombudsman Service, FCA and FSCS co-operation on wider implications issues
The Financial Ombudsman Service is set up under Part 16 and Schedule 17 to FSMA 2000 and referred to in that legislation as "the ombudsman scheme". The ombudsman scheme's statutory purpose is to provide for the resolution of certain disputes "quickly and with minimum formality by an independent person" (section 225(1) of FSMA 2000) based on what is, in the ombudsman’s opinion, fair and reasonable in all the circumstances of the case. The Financial Ombudsman Service is administered by the Financial Ombudsman Service Limited, a company limited by guarantee, which is the "body corporate" established by the Financial Services Authority (now the FCA) under paragraph 2(1) of Schedule 17 to FSMA 2000 (as originally enacted). Financial Ombudsman Service Limited is the "scheme operator" for the purposes of FSMA 2000 (see section 225(2) FSMA 2000).
	The Financial Ombudsman Service is operationally independent from the FCA, but the FCA has a duty to make the rules which govern the Financial Ombudsman Service’s operation (including matters such as the scope of the Financial Ombudsman Service’s jurisdiction and the eligibility of complainants). These rules are in the FCA’s Dispute Resolution: Complaints Sourcebook (DISP).
	The FSCS is a scheme set up under Part 15 of FSMA 2000 to provide for the payment of compensation, up to certain limits, to eligible customers of financial services firms that are unable, or likely to be unable, to pay claims against them. Technically, the FSCS consists of the rules establishing the "compensation scheme" that have been made by the FCA and the Prudential Regulation Authority (PRA) under Part 15 of FSMA 2000. "FSCS" is also used as an abbreviation for the Financial Services Compensation Scheme Ltd, the company limited by guarantee which administers the compensation scheme and which is defined as the "scheme manager" in FSMA 2000 (see section 212(1) of FSMA 2000).
	Like the Financial Ombudsman Service, the FSCS is operationally independent from the FCA, but the FCA and the PRA are responsible under section 212(2) FSMA 2000 for ensuring that the scheme manager is at all times capable of exercising its functions under parts 15 and 15A of FSMA 2000. The FCA’s rules governing the FSCS are in its Compensation Sourcebook (COMP).
	Paragraph 3A of Schedule 17 to FSMA 2000 (Relationship with FCA) requires the Financial Ombudsman Service and the FCA to "take such steps as [they] consider appropriate to cooperate with each other in the exercise of their functions" and requires them to prepare (and publish) a memorandum describing how they intend to comply with that obligation.
	The FCA and the Financial Ombudsman Service have a Memorandum of Understanding in place which was entered into in December 2015 to comply with their duty under paragraph 3A of Schedule 17 of FSMA 2000. This document provides "a framework for the FCA and the Financial Ombudsman Service Limited to cooperate and communicate constructively to carry out their independent roles and separate functions" (paragraph 2). This "is particularly important where the FCA is taking supervisory or regulatory action and, at the same time, the Financial Ombudsman Service Limited’s ombudsman scheme is receiving a significant number of cases concerning the same issue" (paragraph 4). Paragraph 14(d) of the memorandum requires the Financial Ombudsman Service and FCA to "consult one another at an early stage on any issues that might have significant implications for the other organization", and paragraph 14(e) requires them to "share (for comment) at an early stage, draft documents (such as consultation papers and briefings) that affect the other’s functions.".
	Section 232A of FSMA 2000 provides that the Financial Ombudsman Service must disclose to FCA any information which "would or might be of assistance to the FCA in advancing one or more of FCA’s operational objectives". In addition to this obligation, the memorandum makes further provision about voluntary information sharing between the Financial Ombudsman Service and FCA, and provides that the Financial Ombudsman Service and FCA may each disclose information to the other for the purpose of assisting either party in discharging their functions.
	The FSCS and the FCA are subject to an equivalent duty to take appropriate steps to cooperate with each other and to prepare, maintain and publish a memorandum describing how they intend to do so, under section 217A of FSMA 2000 (Co-operation). Accordingly, the FCA and the FSCS also have a Memorandum of Understanding in place, which provides at paragraph 19 that the FCA "will seek advice from the FSCS in relation to domestic or international policy making initiatives that might have a material effect on the FSCS’s ability to administer those schemes effectively now or in the future". This memorandum also states that: the FCA and FSCS "undertake to share information to allow them to fulfil their respective responsibilities" (paragraph 11); the FSCS "will keep the FCA informed in relation to issues concerning the interpretation of rules, the eligibility of claims, and its contingency and scenario planning, where appropriate" (paragraph 12); the FCA "agrees to keep the FSCS informed of any regulatory or market developments that may affect the planning or operation of the FSCS - both in general terms and in relation to the likelihood of a specific firm failing" (paragraph 13); and the FSCS "will keep the FCA informed on the effectiveness of the rules for the compensation scheme".
	The Financial Ombudsman Service and the FSCS are not subject to a bilateral duty of cooperation akin to the duties in paragraph 3A of Schedule 17 to, and section 217A of, FSMA 2000.