Channel Islands Financial Ombudsman – Annual Report 2016.

Channel Islands Financial Ombudsman

ANNUAL REPORT 2016

Fairness of outcome... Fairness of process

Channel Islands

Financial Ombudsman (CIFO) PO Box 114

Jersey

Channel Islands JE4 9QG

Jersey: 01534 748610

Guernsey: 01481 722218

International: +44 1534 748610

Facsimile: +44 1534 747629

www.ci-fo.org

enquiries@ci-fo.org

R.64/2017

C h a n n e l I s l a n d s F i n a n c i a l O m b u d s m a n

TABLE OF CONTENTS

Annual Report 2016

INTRODUCTION 3

Submission Letter 3 Message from the Chairman 4 Message from the Principal Ombudsman 5

ORGANISATION 7

Who We Are 7 How We Work 8 The Process 13

ANNUAL REVIEW 14

2016 Year in Review 14 2016 Complaint Statistics  18 Insight Into Our Approach (case studies) 30 Insight Into Our Approach  36 (Investment Suitability Complaints)

GOVERNANCE, ACCOUNTABILITY

& TRANSPARENCY 38 INTERNATIONAL ENGAGEMENT41 APPENDICES 43

Appendix 1: 2016 Audited Financial Statements (Jersey) Appendix 2: 2016 Audited Financial Statements (Guernsey)

CONTACT Back Cover

C h a n n e l I s l a n d s F i n a n c i a l O m b u d s m a n

SUBMISSION LETTER

CHANNEL ISLANDS FINANCIAL OMBUDSMAN

Senator Lyndon Farnham

Minister for Economic Development, Tourism, Sport and Culture States of Jersey

Cyril Le Marquand House

St Helier

Jersey

JE4 8UL

President Peter Ferbrache

Committee for Economic Development States of Guernsey

Raymond Falla House

PO Box 459

Longue Rue

St Martin s

Guernsey

GY1 6AF

Dear Minister and President

As you know, the Channel Islands Financial Ombudsman is the joint operation of the Office of the Financial Services Ombudsman established by law in the Bailiwick of Guernsey and the Office of the Financial Services Ombudsman established by law in the Bailiwick of Jersey.

On behalf of the Directors, I am pleased to submit the report and accounts for 2016. These take the form of a shared report accompanied by separate accounts, which include a division of overall overheads in accordance with the memorandum of understanding between you.

The report and accounts are submitted under section 1(c) of Schedule 2 of the Financial Services Ombudsman (Bailiwick of Guernsey) Law 2014 and article 1(c) of Schedule 2 of the Financial Services Ombudsman (Jersey) Law 2014.

Yours sincerely

David Thomas, Chairman

MESSAGE FROM THE CHAIRMAN

C h a n n e l I s l a n d s F i n a n c i a l O m b u d s m a n David Thomas

This report from the Channel Islands Financial Ombudsman (CIFO) is for the calendar year 2016. CIFO is the joint operation of independent financial ombudsman bodies established by law in the

Bailiwick of Jersey and the Bailiwick of Guernsey. The report covers the first full year since we opened for business on 16 November 2015.

Financial ombudsmen have been established worldwide. But CIFO is unique in covering two separate international financial centres. This provides flexibility and economies of scale, while doubling the number of governments and stakeholders with whom we deal. We appreciate the support they have all given to us, both in setting up the office and in carrying out our work.

CIFO is an independent body that supports public confidence in financial services provided in the Channel Islands, and internationally from the Channel Islands. We do this by resolving financial services complaints fairly and impartially as an informal alternative to the courts, and by pointing out where things could be improved for the future.

We received more complaints than was expected when plans for the office were laid, more than half from customers outside the Channel Islands. But a higher proportion of complaints than expected was outside the remit given to us by the States. Some were outside the relevant time limits, but a significant number related to types of financial services excluded from our scope.

A notable feature was that we received groups of complaints about a particular financial services provider (FSP), or even about a particular product from one FSP. Although some groups of complaints shared some similar features, we had to treat

each one individually dealing with separate circumstances and separate (often distressed) individuals.

We kept staff and resources to a prudent minimum whilst we gained experience of the longer-term volume and pattern of complaints. So, though we coped with the greater than expected volume of complaints, some cases took longer to resolve than we had hoped and some non-casework activities had to be restricted. We have since scaled up to cope with the greater workload.

As we did last year, we will be convening public annual meetings in Guernsey and in Jersey to

discuss this report. This is part of our commitment to transparency and to engagement with our stakeholders and users. We surveyed users during the year, and will use their feedback to shape our staff training and improve our service.

The annual statistics in this report have, of course, been foreshadowed by the quarterly statistics we published throughout the year. After discussion with our stakeholders, it was concluded that all concerned needed time to adapt to CIFO s existence and approach and that it would not be appropriate to disclose the identity of individual FSPs in relation to cases determined before 1 January 2018.

Looking ahead, around November 2017 my board will stand back and review how things have gone in the two years since the office opened for business with a view to refreshing our strategy for the future in the light of experience. We will be delighted to hear from any of our stakeholders about things they would like us to consider as part of that review.

A definite item on the agenda is a review of the funding formula, by which the cost of CIFO is raised from FSPs. The existing arrangements run until

the end of 2018. But the complexity of devising an arrangement that will be both fair and practicable from 2019 onwards is such that we are starting a programme of focused discussions with stakeholders during 2017.

In conclusion, I am grateful to the other members of my board for their commitment, support, and wise counsel. They and I join in thanking the principal ombudsman and all the members of his staff for their hard work in meeting the dual challenge of getting the office successfully established and in handling the volume of complaints that emerged.

C h a n n e l I s l a n d s F i n a n c i a l O m b u d s m a n

MESSAGE FROM THE PRINCIPAL OMBUDSMAN

& CHIEF EXECUTIVE

Douglas Melville

What a difference a year makes.

The Channel Islands Financial Ombudsman (CIFO) celebrated its first anniversary on 16 November 2016 and completed its first full calendar year of operation on 31 December. For any new endeavour, these are milestones to be celebrated, but they represent only the first steps in a much longer journey for this unique mandate.

Establishing a new public interest mandate, building an office and forming a team is challenging under any circumstances. This is compounded when the initiative is pan-island in nature, working across two jurisdictions and engaging with two of everything from a stakeholder perspective: governments, regulators, industries, media, and consumer and community contacts. It required a great deal of commitment and assistance from all stakeholders across the Channel Islands. This is what we celebrate, and for which we wish to express our appreciation.

We are very gratified to have received such strong support from all stakeholders during our first year of operation. Whether in form of engagement to better understand our mandate and how we function, sharing of information about CIFO to inform industry

and the general public, or referral of complainants

to our office, all of these activities contributed to this new mandate. While we are independent in terms of our decisions on complaints, our frequent contact with both governments and regulators in Guernsey and Jersey helped us to refine our approach to the mandate and lay the structural foundation for our future success. Bodies like the Jersey Consumer Council, Citizens Advice Bureaus on both islands, and Trading Standards have helped to signpost Channel Island consumers to our office and have also helped CIFO staff to appreciate the consumer perspective of challenges encountered with financial services.

As with any new endeavour, the creation of CIFO has not been without its challenges. Complaint volumes during 2016 were nearly double the volume estimated during the pre-launch planning of the office. This was partially off-set by the high proportion of complaints during our first year that fell outside the remit set

by the States. Some (as expected) fell outside the statutory time limits and others (rather more than expected) related to types of financial services excluded from our remit. As time passes, we expect to see the nature of complaints settle into a regular pattern of volumes and themes. We have provided a robust analysis of our complaint volumes for 2016 in this report. The fact that so many consumers brought their complaints to our office during our first year is a positive reflection on both the mandate and the need for an alternative to the courts in seeking redress for losses incurred.

The creation of CIFO was greatly assisted through initial funding from the States of Guernsey and States of Jersey in the form of lines of credit. These were both fully repaid in early 2016 once CIFO had well established the process for raising annual levies.

The patience of industry stakeholders was greatly appreciated while the intricacies of available regulator data and the underlying business activities of financial service providers were navigated to facilitate the levy process going forward.

In another positive aspect of our first full year  these close working relationships for mutual benefit of operation, the financial services industry has  and thank all of our colleagues for their assistance responded to CIFO s creation in several important  during our start-up phase.

ways:

CIFO s independence is the key enabler which makes

   Attendance and engagement at our outreach  it possible to work between the economic power of

events arranged in conjunction with industry  industry and the interests of individual consumers bodies in both Guernsey and Jersey. While we  to achieve fair outcomes to unresolved complaints. welcome all the interest from individual financial  Our independence is vigorously protected by CIFO s service providers seeking to engage with  Chairman and the other Directors. We are grateful

our office, we have limited capacity for such  for their oversight and guidance. CIFO staff and all non-complaint-related activity. We therefore  stakeholders benefit greatly from their collective endeavour wherever possible to arrange outreach  experience in dispute resolution, regulatory and

events through industry bodies to maximise  public policy, financial and legal affairs, and board

the use of staff time and to efficiently share the  governance. They also bring the local perspectives of information as broadly as possible amongst  Guernsey and Jersey so critical to the effective creation industry stakeholders. and sustaining of a pan-island institution. In their roles,

they hold the CIFO team accountable for our effective    Sharing information with their customers  and efficient performance of this important public

about CIFO and the ability to refer unresolved  interest mandate. They are also strong advocates for complaints to our office. fair and effective dispute resolution which benefits consumers, financial service providers, and the

   Engagement with our team to resolve complaints  reputation of the Channel Islands.

constructively and as quickly as possible.

   Working with our team at an early stage to achieve

quick resolutions through mediation rather than insisting on formal determinations. This greatly increased our efficiency and enabled us to tackle far more complaints than otherwise would have been possible with our limited resources during the initial period.

Throughout our first full calendar year, we continued to work with our colleagues engaged in regulation in both Guernsey and Jersey, and occasionally beyond the Channel Islands. Through the sharing of information and cooperation on specific matters,

we seek to assist them in their important work and obtain their assistance to enhance our ability to fairly and efficiency perform our unique dispute resolution function. We are also developing relationships with law enforcement. We plan to continue to nurture

To our staff, I note that we have had a fascinating first year together as we have endeavoured to combine building the infrastructure of our new office with simultaneously resolving a large number of consumer complaints that found their way to us. It has been a challenging year but the team can be justly proud of our progress. We look forward to continuing to lay the foundation for our work while continuing to bring to both parties a fairness of outcome through the application of a fair process; a tough job that the CIFO team has taken on with great commitment, energy and integrity. For that they deserve our heartfelt thanks. Well done.

w

Channel Islands Financial Ombudsman WHO WE ARE

The Channel Islands Financial Ombudsman (CIFO) is the independent dispute-resolution service for unresolved complaints involving financial services provided in or from the Channel Islands of Jersey, Guernsey, Alderney and Sark. Complaints can be brought by any individual consumers and small businesses from anywhere in the world, plus certain Channel Islands charities.

CIFO is a joint operation of two statutory ombudsman roles, established in law by the Financial Services Ombudsman (Jersey) Law 2014 and the Financial Services Ombudsman (Bailiwick of Guernsey) Law 2014, jointly operating under the name Channel Islands Financial Ombudsman. CIFO operates from

a single office in Jersey with one set of staff and the same Board members overseeing the two statutory roles. The States of Jersey and States of Guernsey jointly appointed the Board of Directors and the Board appointed the Principal Ombudsman and Chief Executive. The office commenced operation on 16 November 2015.

The primary role of CIFO is to resolve complaints about financial services provided in or from the Channel Islands. It resolves complaints against financial services providers independently, fairly, effectively, promptly, with minimum formality and so as to offer a more accessible alternative to court proceedings. This helps to underpin confidence in the finance sectors of Jersey and Guernsey, both locally and internationally.

Channel Islands   Douglas Melville

Principal Ombudsman & Chief Executive Financial Ombudsman

HOW WE WORK Sophie WManager, Aatkinsdministration & Stakeholder Relations

George Butler Financial Accountant

Dominic Hind

Case Handler

OUR STAFF

Richard Langlois Our staff with a wide variety of experience  Case Handler

and training in financial services, law, finance,

consumer research and policy, dispute  Ross Symes resolution and regulatory compliance review  Case Handler

and investigate unresolved complaints about

financial services providers (FSPs) in or from the  Heather Rushton Channel Islands. Administration Officer

OUR APPROACH

When we receive a complaint, our team looks at the information provided to make sure it falls within our remit (see our process on page 13). For instance, the FSP has to fall within CIFO s remit as set out by law in both Jersey and Guernsey. A summary of CIFO s remit is set out in the table on page 11. We also look for a final answer from the FSP to the consumer, which allows us to start our review knowing the positions of both parties.

During an investigation, we gather information from both parties and review the facts of the case. We make decisions based on what s fair to both the consumer and the FSP, taking into account general principles of good financial services and business practices, the law, regulatory policies and guidance, and any applicable professional body, standards, codes of practice, or codes of conduct. If we believe that the facts of the case do not warrant further review, we will let the consumer know quickly. We always make sure that we explain our reasons, just as we do when we are determining that compensation is appropriate.

If we determine that compensation is owed to the consumer, we try to resolve the dispute through a facilitated settlement between the consumer and FSP that aims to address the complaint quickly with a fair outcome to both parties.

PRINCIPAL OMBUDSMAN & STAFF

Left to right: Ross Symes, Douglas Melville , Sophie Watkins, George Butler, Heather Rushton, Richard Langlois, Dominic Hind.

If we are unable to facilitate a settlement but we continue to believe the consumer should be compensated, we will complete our investigation and make a determination. Our decision, if accepted by the consumer, becomes binding upon the FSP.

We can require that FSPs pay compensation to the consumer of up to £150,000. We may also determine that compensation for inconvenience is appropriate in the specific circumstances. In some instances, non-financial actions such as correcting a full calendar year record may be appropriate.

Neither a court nor a regulator, CIFO does not fine or discipline FSPs or individuals working within the financial sector. While we do not handle matters that have already been through a court or an arbitration, if a client does not accept our conclusions, they are free to pursue their case through other processes including the legal system, subject to statutory limitation periods.

OUR MANDATE

The scope or mandate of the Channel Islands Financial Ombudsman is set in the primary laws and supporting secondary legislation in Jersey and the Bailiwick of Guernsey. CIFO can only investigate complaints that meet certain conditions relating to the person bringing the complaint, the type of financial service complained about and the timing conditions. The table on the following page summarises the mandate according to the location from where the financial services were provided. Please note that this is a summary and the full detail is provided in the legislation viewable on our website.

A SUMMARY OF

HOW WE DETERMINE IF A COMPLAINT IS WITHIN CIFO S MANDATE

Were the financial services provided in or

CIFO will not be able from Jersey, Guernsey, Alderney or Sark? NO to investigate

YES

Are the financial services provided within  CIFO will not be able

NO

CIFO s remit? to investigate

YES

Are the timing conditions satisfied? NO CIFO will not be able

to investigate

YES

CIFO will not be able Is the complainant eligible? NO to investigate

YES

CIFO will investigate further

THE PROCESS

FROM ENQUIRY THROUGH TO FINAL DETERMINATION AND BEYOND

Enquiry Receipt of  Initial Review Complaint Against Mandate

Information  Complaint Mediation

Gathering Intake Process

Investigation Preliminary  Final

Determination Determination

Market Conduct  Feedback to Industry  Court Enforcement of

Change and Regulator Decision (if required)

YEAR IN REVIEW 2016

OPERATIONS

CIFO s first full calendar year of operation provided numerous indications of what the future may hold for this new and unique mandate. Our small team met the challenges of higher than expected complaint volumes while continuing to establish the infrastructure, policies and procedures that support the day-to-day core function of resolving financial sector disputes.

The volume of complaints experienced by the office (1,293 in 2016) was almost double the annual volume of 700 predicted during the planning phase of CIFO s creation. This was offset by the high proportion of complaints that were found to fall outside of CIFO s remit due to statutory date bars or excluded financial services business. Given the inability to accurately predict the volume of complaints, and not wanting to commit to additional staff in case the initial complaint volumes were a temporary spike, it was decided to delay adding case handler capacity until it was clear whether the initial complaint volumes seen at the beginning of operation at the end of 2015 would continue. Complaint volumes continued above plan through 2016 and the high volume of out of mandate complaints also required significant effort to review, confirm their status against CIFO s remit, and explain to complainants, who were at times highly engaged, why their complaint could not be reviewed under CIFO s remit. These operating pressures resulted in an increase in case file inventory and completion times that were slower than desired by both CIFO and the parties to the complaints. One of the other impacts of higher complaint volumes and constrained capacity was the inability to dedicate sufficient effort to non-case file work related to sharing of learnings from complaints handled by CIFO. This includes the preparation of case studies and root cause analysis. By the end of 2016, the decision was taken to increase case handler capacity by 50% with the addition of a third case handler who joined the team at the beginning of 2017.

One unexpected aspect of the complaints seen in 2016 was the experience of multiple complaints arising from a single financial

service provider involving a single product or issue. Some of these multiple complaints were found to be out of mandate while others represented a significant proportion of CIFO s case file work during the year. The operational impact of these multiple complaints was somewhat counter-intuitive. The workload per case file was not lessened by the multiple nature of the complaints. Indeed, it can be increased. The implications of multiple complaints for the solvency of the financial service provider, the availability of redress through professional indemnity-type insurance, or other sources of funds for redress, can all become a significant issue. A final determination awarding compensation is of little utility to an aggrieved consumer if there are no funds available to pay the compensation.

POLICY ISSUES ARISING

CIFO's complaint reviews can be expected to surface policy issues about the financial services industry and CIFO's remit. These issues will be brought to the attention of CIFO's Board of Directors, the regulators, and the States of Guernsey and States of Jersey as appropriate.

One such issue is that in a dynamic financial sector, businesses are being created, merged, and dissolved. Customers may move their accounts between financial service providers. Financial sector professionals can move between employers and bring their clients along with them. All of this creates a complex system for determining which financial service provider should be responsible for problems that arise or continue over a period of years. We encountered numerous complaints where it was necessary to allocate responsibility between financial service providers for the same loss. In other situations, we sought assistance from financial service providers who were not the subject of a customer complaint but had customer or product information in their possession important to the review of the complaint. These situations exposed limitations in the powers of CIFO to ensure cooperation by financial services providers that held relevant information but were not a party to the complaint.

STAKEHOLDER OUTREACH

During CIFO s first full calendar year of operation, it was important to get out into the community to engage with stakeholders and to help them understand what CIFO is, and sometimes more importantly what CIFO is not. CIFO staff participated in dozens of meetings through the year with governments, regulators, industry groups, consumer and community groups, and the media. All stakeholders have a role to play in making customers aware of the ability to refer an unresolved complaint to our office. It also helps to build support for effective complaint handling both within financial services providers and through CIFO as required.

As a more formal expression of CIFO s commitment to transparency, in July 2016 we convened public annual meetings in Guernsey and in Jersey to present our 2015 annual report and audited financial statements. These were also an opportunity for the public to address questions directly to the Board of Directors and management.

FUNDING

The initial start-up funding for CIFO was provided through lines of credit provided by the States of Guernsey and States of Jersey. Both loans were repaid at the end of Q1 of 2016 once the levy schemes were in place to obtain funding directly from financial service providers in Guernsey and Jersey.

To guide the development of the levy schemes for the initial period of CIFO's operation, the initial funding structure for CIFO was agreed between the States of Guernsey and States of Jersey. It set out that the operating costs for the combined operation should be allocated equally to the States of Guernsey and States of Jersey for an initial period until complaint volume data could be accumulated to support a discussion of alternate funding structures. In late 2016, this initial funding structure was extended by the States of Guernsey and Jersey through to the end of 2018 to reflect the fact that less than a year of complaint data had been accumulated, considered insufficient to form the basis for discussion of a new funding structure for CIFO.

In any financial Ombudsman scheme, one of the biggest challenges is to develop a funding structure that reflects the unique nature of the local market and the legitimate concerns of industry stakeholders. CIFO experienced this challenge in connection with the Guernsey investment sector where the categories of financial services provider subject to CIFO s mandate and liable to pay the annual levy did not align to the categories of regulated entities in Guernsey. It took an extra round of communication with industry in early 2016 and several months to clarify the Guernsey investment sector providers subject to the levy. The cooperation and patience of the Guernsey investment sector during this challenging process was appreciated.

OFFICE INFRASTRUCTURE DEVELOPMENT

CIFO undertook two major office infrastructure projects in 2016. The first was to create a finance function to bring in-house functions such as book-keeping, reporting, payroll and the billing and collection of levies and case fees that had previously been outsourced. The in-house function will replace the outsourced activities from the start of 2017 and will also support statistical and financial analysis relating to CIFO s complaint handling activities.

The second project involved the acquisition, modification, testing, and deployment of a new complaint management system (CMS) to handle CIFO s complaint handling, workflow and reporting. CIFO is grateful to the Ombudsman for Banking Services and Investments (OBSI) in Canada for their generosity in providing CIFO with the code and documentation from their newly-developed CMS. This enabled CIFO to build from a well-designed base system thereby saving our team significant cost, time and effort. The system went live on 1 January, 2017.

LOOKING AHEAD TO 2017

In many ways, 2017 will be an extension of the work we started during 2016. Investing in our team through training and development focused on mediation skills. Investing in our office infrastructure by refining our new complaint management system (CMS). Clarifying our approach for all stakeholders by refining, documenting and communicating our processes for resolving complaints and publishing case studies to inform industry and the general public about complaint issues we see affecting financial consumers.

Building on the success of our working relationships with regulators in both Guernsey and Jersey, we will finalise arrangements with law enforcement in both Guernsey and Jersey to enable information exchange to support each other s mandates.

We will engage in extensive consultation with industry stakeholders to hear their concerns and ideas and begin the process to identify a long-term funding structure for CIFO to become effective from 1 January 2019. Discussions through 2017 will focus on identifying a principles-based approach that is fair and practical. In 2018, the stakeholder discussions will continue, informed by two full years of island-specific complaint volume data which CIFO will begin publishing in Q1 of 2018.

At the end of 2017, the initial period of acclimatisation to CIFO s new mandate will come to an end. Final determinations made from 1 January 2018 onward will identify the financial service provider concerned, with similar changes to published complaint volume data beginning in Q1 2018. 2017 will therefore be the final year for financial service providers to refine their internal complaint handling and become accustomed to mediated resolutions with CIFO before the commencement of the new reporting will place into the public domain CIFO s complaint experience with each financial service provider.

In addition, complaint statistics will distinguish between complaints about Jersey and Guernsey providers starting in Q1 2018.

This presentation of CIFO s complaint statistics COMPLAINT represents the first full calendar year of operation for

the new office and supplements the quarterly complaint STATISTICS statistics regularly published by CIFO on our website.

2016 CIFO commenced operation on 16 November 2015, about

six weeks before the end of CIFO s 2015 fiscal year. None of the 87 complaints received and opened up to 31

December 2015 became case files in 2015. As a result, the 2016 complaint statistics reflect all of the closed case files since CIFO s commencement of operations.

The volume of complaints received by CIFO in 2016 was significantly higher than the volumes predicted during the planning for the new office. Partially off-setting

this higher complaint volume was a significantly higher proportion of complaints which were found to be out of mandate given the limitations placed on CIFO s remit by Jersey and Guernsey legislation.

The complaint statistics are presented for the Channel Islands on a consolidated basis. Island-specific quarterly complaint data will be reported commencing in Q1 of 2018 and annual statistics in next year s 2017 Annual Report.

Compared with the quarterly statistics published for 2016, data have been updated as classification of a complaint can change during its life cycle and there is an ongoing effort made to review and refine the accuracy of complaint data which can lead to minor post-period adjustments.

2016 COMPLAINT STATISTICS SUMMARY

2016 Stage 2 2016 Stage 1 Complaints

Enquiries Received 483 1,293

Stage 3 Initial Review as at 31 Dec 2016

9  112  of mandate

Rejected as out

Total Awaiting  Complaints under initial review Rejections

customer  as out of documents/consent mandate

Appears within mandate

963 7 Stage 4 FSP Document Reques1 t as at 31 Dec 2016of mandate

Rejected as out

Waiting for documents from FSP Pending further

review against remit

Within mandate

Case Fee Payable

Stage 5 Open Case Files as at 31 Dec 2016 (117)

18 65 10 24

Under 30 days 30-60 61-90 Over 90

Closed Case Files (149)

80 30 39 Mediated Decided Withdrawn

2016 COMPLAINT STATISTICS ANALYSIS

Complaints Received - Location from where the financial services were provided

Complaints Received - Location of Complainants

This section of the 2016 Statistics Analysis provides detailed information concerning complaints, which are all customer expressions of dissatisfaction about a financial services provider that have been received by CIFO whether or not they are ultimately deemed to fall within CIFO s mandate.

Of the 1,293 complaints received by CIFO in 2016, 1,276 (99%) were against financial services providers operating in or from within the Channel Islands. 1.5% (15) operated in or from within the UK, and 2 operated elsewhere. When CIFO receives a complaint against a financial services provider operating outside of the Channel Islands, it will be referred to the most appropriate financial ombudsman service or regulator within that jurisdiction.

Of the 1,293 complaints received by CIFO in 2016, 809 (62%) were from complainants residing outside of both the Channel Islands and the UK. 334 (26%) were from Channel Island residents and 150 (12%) were from UK residents.

Complaints Received - Sector of Business Activity

Of the 1,293 complaints received by CIFO in 2016, the majority were about the financial sub-sectors of investments/

funds and trust/fiduciary. 577 (44%)

were about investments/funds and 346 (27%) were about trust/fiduciary. Of the remaining complaints, 178 (14%) were about banking, 115 (9%) were about insurance, 35 (3%) were about pensions, 24 (2%) were about non-bank money services and credit, and 18% (1%) were not financial services-related.

Case Files Opened - Complainant Location

This section of the 2016 Statistics Analysis provides detailed information concerning case files. A case file is

any complaint which has passed the preliminary review against CIFO s remit and an investigation has commenced.

Of the 230 case files opened by CIFO in 2016, 127 (55%) involved a complainant from the Channel Islands, 46 (20%) involved a UK resident, and 57 (25%) involved a complainant resident elsewhere.

Case Files Opened - Sector of Business Activity

Of the 230 case files opened by CIFO in 2016, 102 (44%) related to the investment/fund sub-sectors, 79 (34%) related to the banking sub-sector, 31 (14%) related to the insurance sub- sector, 10 (4%) related to the pensions sub-sector, and 8 (4%) related to the non-bank money services and credit sub-sectors.

Case Files Opened- Product Areas

Over a third of case files (36%) opened by CIFO in 2016 related to financial advice as the product or service. Current accounts were the second most common product

or service, with 53 (24%) case files. Case file volumes involving other product

areas were considerably lower.

Case Files Opened - Issue

The most common issue in case

files opened by CIFO in 2016 was mis-selling or unsuitable investment recommendations, with 99 (43%) cases.

The second most common issue was poor administration or delays, with 47 (21%) cases. This was followed by account closures with 24 (11%) related cases, and the non-payment of insurance claims with 22 (10%) cases.

Percentage of cases resolved by days taken from receipt of FSP file

Percentage of cases

Mediated Determined Total resolved by days taken

<30 27% 3% 21% 30-60 9% 3% 7% 60-90 43% 24% 37% >90 21% 70% 35% Grand Total 100% 100% 100%

<

The time taken is measured from the date of receipt of the documentation from the financial services provider. The graph shows the mediated cases separately from the determined cases and shows the breakdown of the proportions concluded in under 30 days from receipt of FSP s file, 30-60 days, 60-90 days and over 90 days.

The majority of cases closed through mediation in 2016 were resolved within 90 calendar days. In comparison, cases which progressed to the end of CIFO s process, the final determination stage, were more likely to take over 90 days to complete.

Of the 110 cases closed by CIFO in 2016 (excluding withdrawn cases), 65% were closed within 90 calendar days. Of these 110 closed cases, 80 (79%) were resolved by mediation, and 30 (21%) were closed by determination.

Of the 80 cases closed through mediation, 79% were closed within 90 days from receipt of the FSP s file. Of the 30 cases closed through determination, only 30% were closed within 90 days.

Closed complaints

Closed complaint by reason

Closed complaints out of mandate reason

This table shows the closure reasons for all complaints that were closed in 2016. 963 were rejected as they were outside CIFO s remit as set by law.

39 complaints were withdrawn by

the complainant and 80 were settled by mediation, by which we mean

with the assistance of CIFO staff the parties agreed an outcome, and 30 complaints required the full powers of the Ombudsman to be used in issuing a determination on the complaint.

Of the 963 out of mandate complaints which CIFO could not review in 2016, the majority related to financial services exempted from CIFO s remit. 422 related to exempt fund services business, and 339 related to exempt trust company business.

The second most common out of mandate reason was because the relevant act or event occurred before CIFO s statutory maximum reach back date (1st January 2010 for complaints in Jersey and 2nd July 2013 for complaints in Guernsey).

Enquiries - Location of Enquirer

Of the 483 enquiries received by CIFO in 2016, 284 (59%) came from Channel Islands residents and 199 (41%) came from elsewhere.

Enquiries - Type of Enquirer

Of the 483 enquiries received by CIFO in 2016, 423 (88%) came from potential complainants and 60 (12%) came from financial services providers.

Complaints Received - Type of Complainant

Closed Case Files by Outcome

Compensation Data Of the 1,293 complaints received by  CIFO in 2016, 1,256 (97%) were brought  

Maximum £67,235 by consumers, 31 (2%) were brought  

on behalf of microenterprises, 3 were  Average £5,231 brought by trustees, 2 were brought  

by enterprises, and 1 was brought by a  Median £513 charity.

Minimum £19 Of the 110 case files closed in 2016,  

50 (45%) were upheld in favour of  

For mediated and determined cases closed where  the complainant with increased  compensation was financial in nature. compensation awarded over any  

originally offered by the FSP. In another  18 (16%) we found that the complaint  was upheld but the compensation CIFO  awarded was the same or less than  

that previously offered by the FSP. In 42  case files (38%), we did not uphold the  complaint.

Of the cases which were resolved in  favour of the complainant and involved  financial compensation, the largest  award of compensation was £67,235.  The average award of compensation was  £5,231.  

The case studies presented in this report and INSIGHT INTO OUR APPROACH published on CIFO s website are intended to

illustrate the type of complaints handled and CASE STUDIES the approach taken to resolve them. The case

studies are based on actual CIFO case files.

Some specific details may be altered to protect

confidentiality.

Case Study #1

BANK MISLED CUSTOMER ABOUT INTEREST RATE

Mrs B complained that her bank had not paid interest on her account at the rate she had been promised.

She said that, while she was carrying out a transaction at local branch of her bank, the cashier noted she had a large balance in her account and asked her if she wanted to change to a different account with an interest rate of 7%. Mrs B agreed and a meeting was arranged with another member of the bank s staff for a later date. Mrs B left that next meeting believing that she had opened a new account which would pay her interest at 7% for the rest of the year.

At the end of the year, Mrs B was annoyed and disappointed to see that no interest had been paid. She visited the bank branch. The staff member she met was apologetic but said that the bank did not have an account that paid 7%. The best Mrs B could have received was 6%, but she would have needed to open a separate savings account.

Mrs B asked the bank for the interest which she would have earned approximately £900 - but the bank did not agree. It gave her £75 as a gesture of goodwill. Mrs B was dissatisfied and referred her complaint to CIFO.

We contacted the bank. It confirmed that it did not have any account which paid 7% interest. It did have a savings account that paid interest at tiered rates, depending on the amount in the account, up to a maximum of 6%.

But it said the account Mrs B opened was merely an upgraded version of her previous transaction account offering no interest. She would have been upgraded

Themes

   Bank Account

   Interest Rate

   Misrepresentation

   Lack Of Communication

automatically to this new account anyway one month after she came into the branch to complete the account change.

We asked the bank for a statement from the employee who had opened the new account, and asked why Mrs B had not been given the terms and conditions for the new account. The bank said that the employee had left. It did not have any notes of the meeting, but it did not think upgrading Mrs B s account was the same as opening a new account. This was why it had not advised Mrs B about the interest rate and the account terms and conditions.

Conclusion

In the light of the available evidence, we concluded that Mrs B had indeed been led to believe that she would receive 7%. It was not unreasonable for her to believe this, especially as she was not given written details of the new account and the bank s website suggested that it paid between 4% and 8% on its savings accounts, depending on when they were opened.

We concluded that Mrs B should be put in the position she would have been in if the bank had given her the correct information at the outset. If it had, she would have had her money in an account that paid up to 6%, meaning that she would have earned interest of £98. We recommended the bank to pay her that, plus £500 for the inconvenience it had caused her in getting her to open an account that she would otherwise have received automatically. Both parties agreed.

Case Study #2  Themes

   Delay

BANK CAUSED UNNECESSARY  Documentation INCONVENIENCE TO    Lack of clear guidance

   Non-resident customer CUSTOMER DURING ACCOUNT  Consequential loss

SUSPENSION AND CLOSURE   Account closure

   Reasonable notice

Mr E lived in Africa. He complained that Bank A suspended his account, and later closed it, without cause and that this resulted in the loss of a business opportunity.

In order to minimise fraud, banks are required by law to hold certain know your client information about their customers. When Mr E notified Bank A of his change of address, it realised that the information it held was incomplete.

In August 2014 the bank asked Mr E for proof of his address. In October 2014 it sent him a reminder. Mr E said that he sent the information in November 2014. The bank said it did not receive it. In December 2016 the bank suspended Mr E s account.

In December 2014 Mr E sent the bank a tenancy agreement to confirm his address, but this was in the name of a company rather than Mr E so, after checking with its compliance team whether it was possible to obtain an exemption, the bank concluded that the evidence was insufficient to meet the bank s legal obligations.

In February 2015 Mr E opened an account with Bank B, which sent Bank A a printout of Mr E s address. Bank A did not consider that was sufficient, and it was not until 3 June 2015 that Bank A received sufficient evidence from Bank B. On 23 June 2015 Bank A lifted the suspension from Mr E s account. Bank A offered Mr E compensation of £100 for the short delay from 3 June to 23 June.

In October 2015 the bank again wrote to Mr E giving him 60 days notice of its decision to close his

account. In December 2015 the bank closed the account.

In January 2016 Mr E phoned the bank. It said that he could obtain the funds on the closed account by sending in a written payment instruction. Mr E sent such an instruction, but the bank responded that

it needed supporting documentation, including a certified copy of his passport and confirmation of his home address. Mr E arranged for Bank B to provide information to Bank A, which released his funds 20 days after it had received his original written payment instruction.

Mr E complained about Bank A s original suspension of his account. He said that it was unreasonable

in asking for a residential postal address, as there was no such system in the country where he

lived. The suspension of his account had caused him inconvenience, and he had lost a business opportunity in Asia. He also complained about the subsequent closure of his account and said he had been given insufficient notice.

Conclusion

In respect of the suspension of the account, we concluded that Bank A had not acted unfairly. It had no choice but to comply with its legal obligations. It followed that the bank was not responsible for

the loss of the business opportunity to which Mr E referred. The bank had been a little slow in lifting the suspension once it received the necessary information, but we considered that the £100 compensation for this already offered by the bank was sufficient.

In respect of the later closure of the account,  

banks are normally free to decide with whom they  will do business (provided there is no illegitimate  discrimination). We decided that the bank s decision  to close Mr E s account was a legitimate exercise of  its commercial judgement, and there was no evidence  that it had done so for an illegitimate reason. It was  required to give him reasonable notice, and the 60 days it had given him was sufficient. But the bank had erred in causing delay in transferring the money from the closed account. Despite its previous experience

of difficulties caused by his residence in Africa, it had failed to tell him accurately what documents would

be required. We decided that the bank should pay Mr E a further £500 for the inconvenience he had been caused by this.

Case Study #3 - Investments UNSUITABLE INVESTMENT

Mr and Mrs A complained that they had lost money as a result of unsuitable investment advice.

In 2009 Mr and Mrs A consulted firm X about the investment of £65,000. They were classified as low/ medium risk investors. They were advised to put all the £65,000 into a single investment fund. Later that year, the employee who advised them moved from firm X to firm Z.

In 2010 Mr and Mrs A s investment came up for annual review. Firm Z did not raise any issues or concerns. In 2011 the investment fund ceased trading. Mr and Mrs A s investment dropped in value and then became illiquid when the fund stopped paying out.

By this time firm X had been liquidated. So Mr and Mrs A complained to firm Z. They said that the investment fund was high risk and therefore unsuitable for them. Firm Z rejected their complaint, and Mr and Mrs A referred it to us.

We did not consider that firm Z was responsible for the original advice given by firm X. But firm Z had taken on the ongoing responsibility to keep the suitability of Mr and Mrs A s investment under review. The first reasonable opportunity that new firm had to identify issues with the investment was the annual review in 2010.

  Unsuitable investment advice

   Distinction between concentration and

suitability of investments

   FSP responsibility for new business

   Opportunity costs

   lliquid investments

   Uncrystallised losses

Conclusion

We did not agree with Mr and Mrs A that in 2010 the investment fund was inherently high risk or unsuitable for them. But, after reviewing their total investable assets, we considered that it was unsuitable to concentrate all their £65,000 in a single fund. It should have been diversified in order to spread risk.

In the light of the total value of Mr and Mrs A s investable assets, it was unsuitable to invest more than 25% of these (amounting to £27,337) in the

single fund. At the time of the review in 2010, they had £43,095 more than this in the fund. So we required firm Z to pay Mr and Mrs A what the £43,095 would have been worth if it had been suitably reinvested calculating this using a benchmark, specified by us,

for a low/medium risk portfolio.

To avoid the possibility that Mr and Mrs A would recover twice over if the investment fund recovered and paid out, we made it a condition that they transferred the excess holding in the investment fund to firm Z.

Case Study #4 - Non-Bank  Themes

   Unfair contract terms

Money Services and Credit   Early resolution

EARLY REPAYMENT CHARGE    Statutory exception to 90-day complaint

timescales

ON PRIVATE FINANCE

AGREEMENT

Mr B and Miss C complained that were being asked to pay an unreasonable charge on repaying a private finance agreement.

In 2011 Mr B and Miss C obtained private finance on their property through a local credit broker. They refinanced in 2012, and then again in 2016. The lending agreement in 2016 differed from the previous ones, because it required a period of two years to pass

before notice could be given to pay off the loan early.

Conclusion

We managed to mediate a speedy settlement between the parties, enabling the sale and purchase to go through. Mr B and Miss C agreed to pay three months (instead of two years ) additional interest, and the private lender agreed to accept this.

Mr B and Miss C did not realise about the change until after they had arranged to sell their house and buy another. As well as paying off the balance of the loan, the lender wanted them to pay two years interest in advance. They complained to us that their sale and purchase were due to go through in a matter of weeks and they would be left with insufficient money to pay for the house they were buying.

In normal circumstances, would not consider a complaint until the financial service provider has

had a reasonable opportunity to investigate and respond. But the law under which we operate gives us discretion to waive this in exceptional circumstances. In view of the urgency of the property situation, we agreed to look at the complaint.

Case Study #5 - Pensions

UNSUITABLE INVESTMENT ADVICE IN AN INDIVIDUAL PENSION FUND

Mrs C complained that her pensions adviser had given unsuitable investment advice and was offering inadequate compensation.

The pensions adviser wrote to Mrs C with its advice on her pension. The main recommendation was that her existing personal pension should be transferred to a retirement annuity trust scheme, or RATS, and invested in certain investments suggested by the pension adviser. This included putting £25,000, about 20% of Ms C s pension assets, in a type of investment called a structured note .

A little over two years later, Mrs C complained to

the pension adviser about the investment advice. Payments totalling £6,120 had been made from

the structured note to her RATS account, but the underlying value of the note had since fallen and it no longer had any market value.

The pension adviser conceded that the structured note was not a suitable investment in Mrs C s circumstances. It offered to pay the difference between the original £25,000 invested and the value of the note, less the £6,120 received as income. In effect, Mrs C would have ended up with the £25,000 originally invested.

Mrs C rejected that and referred her complaint to us. She wanted a higher amount of compensation, plus additional compensation for a missed investment opportunity that she said she could otherwise have pursued with a 30% tax free lump sum withdrawn from her RATS account.

  Unsuitable investment advice

   Appropriate loss calculation

   Opportunity cost

   Speculative or consequential loss

   CIFO handling of situations where own staff

are conflicted

A senior member of our staff knew Mrs C personally, so a potential conflict of interest arose. To ensure the complaint would be seen to be handled impartially, our Board of Directors appointed a temporary ombudsman for this case. He was an outside

expert with extensive experience in the resolution of pension-related complaints and handled the complaint outside our office.

Conclusion

Having investigated the matter, and after considering the parties representations on his initial views, the temporary ombudsman issued his decision. He decided that Mrs C should be paid what she would have received (in capital and income) if the £25,000 had been appropriately invested calculated according to a benchmark for a balanced-asset portfolio less the income of £6,120 that she had actually received. This should be paid into the RATS account as a tax free adjustment. She should also be paid directly compensation of £300 for inconvenience.

The ombudsman did not award compensation for

the missed business opportunity. He concluded that there was insufficient evidence that this arose from the unsuitable investment advice or from the dispute about the appropriate level of compensation. Mrs C could have withdrawn the 30% at any time, but chose not to do so pending resolution of her complaint.

INSIGHT INTO OUR APPROACH CIFO APPROACH TO INVESTMENT SUITABILITY COMPLAINTS

When an investor engages with a financial adviser, it starts an important process and relationship which shares an investor s most private information and deals with their personal assets. When something goes wrong with that relationship, and usually in conjunction with investment losses on individual investments or the portfolio as a whole, complaints are sometimes raised that investment losses occurred as a result of unsuitable investment advice. The following gives an indication of the general approach that CIFO is minded to take in reviewing this type of complaint.

It bears clarification at the outset that CIFO does

not exist to insulate investors from market risk they knowingly took with their investments. Investment losses are a normal part of financial markets and the risk-return trade-off. Not surprisingly, complaints rarely emerge when investments, suitable or otherwise, are generating positive investment returns. Investors are not necessarily owed compensation for investment losses merely because they complain. The review of the complaint starts with the process that determined the suitability of the investment recommendations.

The financial adviser is the individual in the relationship that has the role of identifying the relevant information to determine an investor s personal circumstances, investment objectives, investment experience, risk tolerance, and time horizon. This role is about getting to know your client (KYC) and is referred to as the KYC process. The financial adviser is also expected to know the product being recommended to the investor, so that the financial adviser can make a recommendation of an investment that matches the personal circumstances

of the investor as identified in the KYC process. Finally, the execution of the investment decision needs to proceed as expected to purchase a suitable investment.

This can be described as a chain of responsibilities held by the investment adviser. The objective reality of the investor s personal circumstances should be reflected in the information gathered during the KYC process. The process is not a signed KYC form in the investor s file, but rather the information gathered from a discussion with the investor that sets out the personal characteristics of the investor noted above and forms the basis for identifying and recommending suitable investment options. The investment adviser then recommends an investment that is consistent with the KYC information. A low-risk inexperienced investor with a short time horizon is not likely to be suitably invested in a complex, medium to high risk, illiquid, and long-term investment product. Such

a visible disconnect between the investor and the investment recommended would need to have been part of the discussion with the investor and would need to have been well-documented. These types of disconnects between the personal circumstances of an investor, the KYC information gathered, and the nature of the investment recommended form the basis of most complaints about investment suitability.

In order to arrive at a determination of what would be fair and resonable in the circumstances, we look at the relevant law, any codes of practice

or other regulatory guidance from the Financial Services Commissions, any other relevant regulatory instruments, and relevant industry good practice at the time.

Where we determine that an unsuitable investment recommendation has been made, we seek to put the investor back in the position they would have been in had the unsuitable investment not occurred. Depending on the circumstances, this can be a simple analysis or a tremendously complicated

one depending on the nature of the investment or investments and the time periods involved. We may decide that an investor should be able to return

the investment or be compensated for the losses they suffered due to an unsuitable investment recommendation. If on the other hand an investment has been found to be suitable, the fact that an investor lost money does not make it a valid complaint and we would say that to the investor.

In the case of losses due to an unsuitable investment recommendation, we would consider what the investor lost as well as what would have happened had the unsuitable recommendation not been made. Sometimes this means putting the investor in the position they were in before in a different investment. Sometimes, especially in situations involving the investment of cash, it involves looking at what would have happened if the investment had been made in a suitable investment product.

GOVERNANCE, ACCOUNTABILITY AND TRANSPARENCY

GOVERNANCE ACCOUNTABILITY AND TRANSPARENCY

When combining an important public interest mandate with a strict need for independence, it is important to demonstrate accountability and transparency. CIFO is taking several steps to ensure that we are held accountable for our performance of the role and to support our commitment to continuous improvement.

Customer Satisfaction

In dispute resolution, there are two parties to every complaint who benefit from CIFO s performance of our impartial role, the complainant and the financial services provider. Following our first full year of operation, CIFO surveyed both complainants and providers to obtain their feedback on our performance and to highlight areas where we need to improve.

The one theme that consistently featured in complainant feedback was CIFO s reliance upon written material in evaluating complaints rather

than direct and frequent contact with complainants. There was a clear desire for a more engaged and empathetic approach given the stressful situations that complainants are experiencing when they refer unresolved complaints to our office. CIFO is working with all staff to promote more proactive communication with complainants and to keep

them better apprised of the ongoing status of their complaint with our office.

The one consistent theme raised by financial services providers was a desire for faster resolutions. Given CIFO s small team of case handlers and the volume of complaints being referred to CIFO, speed of resolution is an issue that is difficult to resolve without additional resources. Financial Service Providers can assist with addressing this challenge by focussing on a few specific areas. Excellent internal complaint handling, client record-keeping, and early engagement with CIFO when complaints are referred can contribute significantly to reducing the time required by CIFO to resolve a complaint.

Informal External Review

To ensure that CIFO s performance meets professional standards of excellence after our first full year of

operation with a new team, we engaged two highly experienced financial ombudsman practitioners to conduct an independent review of CIFO s operation. One reviewer brought experience in banking complaints, the other experience in investment and insurance complaints. The external review included a thorough assessment of a number of actual CIFO case files, CIFO procedures, and on-site observation of staff handling of complainant calls and case files.

The external review noted the progress made to date establishing the new office and highlighted a number of areas to address to promote consistent excellence in case file handling. The external reviewers

made suggestions regarding the tone of written communication, the need to supplement the receipt of written submissions with more verbal contact

with the parties to the complaint, the timing and consistency of initial responses to complainants, and the provision of updates to complainants throughout the review process. One additional issue raised by the external review was the need to identify, and develop effective means to deal with, vulnerable complainants requiring special handling.

To address these issues, both reviewers have been engaged to conduct training in the form of master classes for CIFO staff to reinforce desired procedures and enhance skills.

Adoption of, and Assessment Against, Performance Standards

The Ombudsman Association (OA) has prepared draft standards to guide its members in the pursuit of excellence in Ombudsman practice. It is expected that these draft standards will be approved by the OA membership sometime in 2017. As an OA member, CIFO will assess its compliance with these standards and indicate where it meets or does not meet each standard, and if not, explain why. If the draft standards are finalised in 2017, CIFO will note its performance against these standards in its 2017 Annual Report.

CIFO Board Review in Q4 of 2017

In the fourth quarter of 2017, CIFO will reach the two year mark in its operation. CIFO s Board of Directors

intends to conduct a review of CIFO s operation in Q4 to ensure that CIFO s operations are well-prepared to meet future challenges. All stakeholders are asked to provide their views to the Board of Directors on CIFO s mandate and the office s performance against the mandate. Views can be sent to the attention of the Board at CIFO s office by post or by email to Ombudsman@ci-fo.org.

Transparency of Governance

CIFO is taking several steps to ensure the continued transparency of our operation. The expenses of the Chairman and Directors as well as those of the Principal Ombudsman are posted to CIFO s website at https://www.ci-fo.org/wp-content/uploads/2016/07/ CIFO-Board-of-Directors-and-Principal-Ombudsman- Expenses-2016.pdf. Chairman and Director remuneration and attendance record at Board of

Director meetings is provided in this Annual Report. Minutes of Board of Director meetings are posted on CIFO s website at https://www.ci-fo.org/about/ governance/board-minutes/.

Transparency of Operation

In addition to the provision of annual audited financial statements, CIFO will be publishing final determinations on its website starting in 2017. We also plan to publish more case studies to illustrate significant complaint issues arising from our reviews of complaints. This

will provide a clear picture of the nature of complaints referred to CIFO and how they are handled to achieve

a resolution based on what would be fair in the circumstances. CIFO will continue its current practice of publishing quarterly complaint statistics. Effective 1 January 2018, published determinations will name the financial service providers involved. Complainants names are not published.

Attendance at Board Meetings

Regular in-person meetings of the Board of Directors were scheduled throughout 2016. Additional meetings were held by conference call as required. All directors were in attendance for every one of the 8 meetings of the Board of Directors held in 2016.

DIRECTORS' ATTENDANCE AT 2016 BOARD MEETINGS

No. of meetings No. of meetings No. of meetings Attendance

held attended absent rate

David Thomas (Chair) 8 8 0 100% John Curran 8 8 0 100% Debbie Guillou 8 8 0 100% John Mills 8 8 0 100%

DIRECTOR REMUNERATION 2016

David Thomas (Chair) £34,500 John Curran £6,000 Debbie Guillou £9,000 John Mills £6,000

THE FOUR MEMBERS OF THE CIFO BOARD OF DIRECTORS ARE:

Left to right: John Mills, Deborah Guillou, David Thomas & John Curran.

David Thomas (chairman) is also a member of the Regulatory Board

of the worldwide Association of Chartered Certified Accountants.

He was formerly: a lawyer in private practice and a member of the Council of the Law Society (England and Wales); Banking Ombudsman (UK); principal ombudsman with the Financial Ombudsman Service (UK); and a director of the Legal Ombudsman (England and Wales). He has advised on financial consumer protection in more than

30 countries.

John Mills CBE was formerly a senior civil servant in the UK and in Jersey. He was lately a board member of the Jersey Financial Services Commission and vice- chairman of the Port of London Authority. He is currently deputy chairman of Ports of Jersey Ltd, and undertakes several honorary roles in the Island including chairing the Investment Committee of the Public Employees Pension Scheme and sitting as a Tax Commissioner of Appeal.

Deborah Guillou is a qualified accountant and chief executive of the Medical Specialist Group in Guernsey. She was formerly: head of Generali International; chief financial officer of Generali Worldwide Insurance; a senior finance manager at Investec Asset Management; finance director at Guernsey Electricity; and an accountant with Fairbairn International.

John Curran is chairman of Guernsey Mind (the mental health charity). He was formerly: the chief executive of the Channel Islands Competition & Regulatory Authorities; director general of the Office of Utility Regulation (Guernsey); and manager of

the Operations Division of the Commission for Communications Regulation (Ireland).

INTERNATIONAL ENGAGEMENT

Given the international nature of the financial services sector in the Channel Islands, it is not surprising that CIFO has formed relationships with various international bodies active in the area of Ombudsman practice, dispute resolution, and financial services.

Visits to CIFO by International Guests

The unique nature of CIFO as a small-scale, statutory office covering complaints involving virtually all aspects of financial services in two separate jurisdictions

makes our office a reference point of interest for those considering implementation of their own financial Ombudsman scheme. CIFO was proud to welcome study tours to the Channel Islands from Malawi and Nigeria during the past year. They were given an opportunity to understand how our new mandate forms an important part of the broader legal and regulatory framework to protect financial consumers and enhance the reputation of the Channel Islands and its financial sectors.

The International Network of Financial Services Ombudsman Schemes (INFO Network)

CIFO is a proud member of the INFO Network whose membership includes about 60 financial sector bodies around the world engaged in dispute resolution for financial services consumers. The INFO Network focuses on professional development and mutual support amongst member schemes. Details on the network can be seen at:

http://www.networkfso.org/index.html

CIFO s Principal Ombudsman has been involved in

the elected Committee providing governance for

this international professional body, serving on the Committee since 2010 and, since 2013 as elected Chairman, then re-elected in 2015 for a further two-year term. In September of 2017 at the Annual General Meeting of the INFO Network, CIFO s Principal Ombudsman will conclude his term of service, both on the Committee and as Chairman.

EU Financial Dispute Resolution Network (FIN-NET) FIN-NET is the European Union's network of financial dispute resolution schemes and helps consumers resolve cross-border complaints involving financial services. Details on the network can be seen at: https://ec.europa.eu/info/business-economy-euro/ banking-and-finance/consumer-finance-and-payments/ consumer-financial-services/financial-dispute- resolution-network-fin-net_en

While the Channel Islands are not members of the European Union (EU), the importance of the European market for the Channel Islands financial sector, the extensive regulatory framework being established for

the provision of financial services into the EU, and the proportion of complainants referred to CIFO who are resident outside the Channel Islands, make this EU body highly relevant for CIFO. As one of two Official Observers and Affiliate Members of the FIN-NET network (the other being the Swiss Banking Ombudsman), CIFO is invited

to attend the semi-annual meetings of FIN-NET. CIFO is also in touch with individual FIN-NET member schemes periodically to refer complaints better resolved by those schemes and to accept referral of complaints from FIN- NET member schemes that fall within CIFO s remit to resolve.

Ombudsman Association

In 2016, CIFO became a member of the Ombudsman Association (formerly the British and Irish Ombudsman Association or BIOA). Details on this association can be seen at: http://www.ombudsmanassociation.org/index.php

This professional body of Ombudsman practitioners seeks to promote and support the development of Ombudsman schemes and provides opportunities to engage in professional development and policy advocacy in the area of dispute resolution. Through this body, financial sector Ombudsman schemes interact with other Ombudsman practitioners involved in dispute resolution across a broad range of sectors where alternative dispute resolution offers a compelling value proposition to society.

UK Financial Ombudsman Service (UK FOS)

Given the deep connections of the Channel Islands with the UK and the number of UK-based financial service providers offering services in or from the Channel Islands, it is not surprising that CIFO receives a significant number of complaints involving UK residents or UK-based financial service providers. It has proven very helpful to have a

close working relationship with our counterpart scheme in the UK, the Financial Ombudsman Service (UK FOS). CIFO regularly refers complainants to UK FOS when the subject matter of a complaint falls within their remit and CIFO accepts referrals from UK FOS of complaints which fall within CIFO s remit. CIFO has also benefitted from training opportunities for our staff and visits by UK FOS experts, both kindly offered by our UK colleagues to support the successful establishment of our new mandate in the

Channel Islands.

STATEMENTS

Office of the Financial Services Ombudsman (Jersey)

STATEMENTS

Office of the Financial Services Ombudsman

(Bailiwick of Guernsey)

Fairness of outcome... Fairness of process

CONTACT AUDITORS OUTSOURCE SUPPLIER

(BOOKKEEPING AND INDUSTRY LEVIES)

Channel Islands Financial Ombudsman (CIFO)

PO Box 114

Jersey

Channel Islands

JE4 9QG

Jersey: 01534 748610 Guernsey: 01481 722218 International: +44 1534 748610 Facsimile: +44 1534 747629 www.ci-fo.org enquiries@ci-fo.org

KPMG Channel Islands Jersey Office

37 Esplanade

St Helier

Jersey

Channel Islands

JE4 8WQ

Jersey: 01534 888891 www.kpmg.com/channelislands

Grant Thornton Limited Kensington Chambers 46/50 Kensington Place St Helier

Jersey

Channel Islands

JE1 1ET

Jersey: 01534 885885 www.gt-ci.com

Credits for production and layout: The Refinery, Jersey, Channel Islands