Offshore Ombudsman Part II: busman's holiday continues in Jersey
The creation of a joint Office of the Financial Services Ombudsman ("OFSO") for Guernsey and Jersey took a step closer on 1 April 2014 as the States of Jersey approved the Financial Services Ombudsman (Jersey) Law 201.
All that remains is for the Privy Council to approve the law. The accompanying Guernsey legislation is currently being drafted using the Jersey statute as a reference.
Should this happen, the Jersey government has advised that the Minister of Economic Development will consult on secondary legislation implementing the law, including an order to exempt certain financial services from the scope of the OFSO and an order on eligible complainants. Financial firms wishing to respond to this consultation should do so before 8 May 2014.
The consultation has provided details of the cost of the OFSO, with licensed firms facing a £590 start-up levy to establish OFSO (the cost of which is estimated at £183,000). Banks will then face an annual levy of £4,620 and £660 for other financial services businesses. Case fees will be a modest at £200 (in comparison to those of the UK FOS which are now over £500).
The main point to note from the order on eligible complainants is that, thanks to the Channel Islands' mixed legal heritage, foundations are also eligible complainants alongside trusts. Currently the secondary legislation exempts all business from the jurisdiction of the OFSO except for:
- deposit-taking business;
- money service business;
- the business of a functionary relating to a recognised fund;
- general insurance mediation business;
- insurance business;
- investment business;
- pension business;
- credit business; and
- ancillary business relating to the above.
The jurisdiction of the OFSO will be much less broad than that of the UK FOS, whose compulsory jurisdiction relates to activities set out at DISP 2.3.1. In particular, trust business, a core competency of Jersey and Guernsey, is excluded unless the business relates to pensions business (which in practice will protect mainly local residents). Further, Guernsey intends to exclude all fund classifications from the jurisdiction of the OFOS except Class A funds (ie those most often targeted at retail investors).
However, as in the UK, the reference to 'ancillary business' is very vague. With no guidance on what this encompasses, UK FOS adjudicators have, in our experience, sought to bring a wide range of unregulated activity within the jurisdiction of the UK FOS. Let us hope that this new Ombudsman is more generous of spirit while offshore.