Accountability of regulators Financial Ombudsman Service, FCA and FSCS co-operation on wider implications issues
The FCA is the conduct regulator for the financial services sector. A key part of its role is to set rules that financial services firms must adhere to. It is responsible for the conduct of around 51,000 financial services firms, the prudential regulator for 49,000, and sets specific standards for 18,000 in the UK.
	The Financial Ombudsman Service is an alternative dispute resolution service for financial services complainants such as consumers and smaller businesses which have a complaint about a financial services firm or claims management company – it is provided free to complainants at the point of use. Its statutory purpose is to provide for the resolution of disputes quickly and with minimum formality by an independent person.
	The Financial Services Compensation Scheme (FSCS) exists to provide protection for eligible customers of financial services firms authorised by the FCA. It protects consumers that incur financial losses when authorised firms are unable, or likely to be unable, to pay claims against them.
	Whilst the FCA, the Financial Ombudsman Service and the FSCS have distinct roles, the work of each organisation will often be relevant to, or have implications for, the other. Given this, the FCA and the Financial Ombudsman Service are subject to a statutory requirement to take such steps as they consider appropriate to co-operate with each other in the exercise of their functions. The FCA and the Financial Ombudsman Service are required by statute to maintain a memorandum of understanding (MoU) describing how they intend to comply with this requirement to cooperate. The FSCS and the FCA are also subject to a statutory requirement to cooperate with each other and maintain an MoU describing how they do so.
	In some cases, issues being considered by the Financial Ombudsman Service, the FCA or the FSCS will have significant implications for the other, and/or for the wider financial services sector. For example, if the Financial Ombudsman Service receives complaints from a large number of consumers in relation to potential wide-spread misconduct (e.g. mis-selling) this may have implications for the FCA’s regulation or supervision of those financial services firms, or may lead to claims for FSCS compensation in the event that firms fail. The FCA, the Financial Ombudsman Service and the FSCS may need to cooperate to determine the optimal way of delivering redress to the affected consumers. Similarly, the development of new regulatory rules by the FCA could have implications for the number and nature of complaints brought to the Financial Ombudsman Service, for example if they impose significant new requirements on firms. When issues with wider implications emerge, it is beneficial for the organisations to work together to ensure timely, collaborative discussions to determine the most appropriate approach to managing such issues.
	To promote effective cooperation on wider implications issues, the FCA, the Financial Ombudsman Service and the FSCS (together with the Money and Pensions Service and the Pensions Regulator) voluntarily operate a Wider Implications Framework , which was formally launched in January 2022. This framework provides a transparent structure for collaboration between these organisations, and ensures appropriate information is shared with stakeholders through the publication of minutes of meetings, an annual report and a central log of the issues identified. The Terms of Reference for the Wider Implications Framework are published on the Financial Ombudsman Service’s website.
	The Act makes it a statutory requirement for the FCA, the Financial Ombudsman Service and the FSCS to cooperate on issues with wider implications, to ensure that these existing arrangements will endure over time. Requiring the FCA, the Financial Ombudsman Service and the FSCS to maintain arrangements to cooperate in respect of these issues seeks to ensure increased coordination on wider implications issues to support better outcomes for financial services firms and consumers.
	In addition, the Act requires the FCA, the Financial Ombudsman Service and the FSCS to publish a statement of policy setting out how they will comply with this duty to cooperate on wider implications issues. It also requires them to put in place arrangements for stakeholders to provide representations on their compliance with the duty, and requires the publication of an annual report on compliance with the duty including any representations received from stakeholders.