In its April Circular communication, FOS revealed that since 1 January 2010, 18 financial services providers (FSPs) have been unable to comply with 99 determinations made by FOS in favour of consumers – totalling $8.34 million.
All but one of the unpaid 99 determinations “were in the investment area involving financial advisers”, according to FOS.
“In the investments, life insurance and superannuation area, the level of unpaid determinations is 33 per cent of all determinations made,” said the ombudsman.
“The value of the outstanding amounts awarded by these determinations as at 31 December 2013 is $8,335,479.95 plus interest,” said FOS.
The 18 firms involved represent a small proportion of the FOS’s 4,700 financial licensee members, said the ombudsman.
“One of the [18] firms is currently in administration and a further nine are in liquidation. The remaining eight have advised they have insufficient funds to meet their obligations,” said FOS.
“Under FOS’s terms of reference and ASIC’s Regulatory Guide 139, FOS must report financial services providers’ non-compliance with determinations to ASIC,” said the ombudsman.
“We are also examining if there are any further steps we can take under our constitution and terms of reference to address consumer concern,” FOS said.
FOS remains in “active discussions” with ASIC on the issue.
“We understand that ASIC has taken regulatory action against, or is currently investigating, many of the financial services providers who have not paid determinations,” said FOS.
I wonder how much of this was “product failure” dressed up as “inappropriate advice”.
It’s time the funds management industry started a national compensation scheme. Better late than never.