Channel Islands Financial Ombudsman – Annual Report 2017

Channel Islands Financial Ombudsman

ANNUAL REPORT 2017

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.82/2018

OUR MISSION

The Channel Islands Financial Ombudsman (CIFO) is independent. We support public confidence in financial services by resolving complaints when things go wrong and pointing out where things could be improved. We are easy to use and understand, and free for complainants. We do not take sides. We decide what is fair, even if that is not popular. We are open about our work. We are prompt and efficient, and seek to get better at what we do.

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 2017

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

Year in Review 2017 14 Complaint Statistics 2017 21 Insight Into Our Approach (case studies) 34

Insight Into Our Approach

(investment suitability complaints) 43

GOVERNANCE, ACCOUNTABILITY

& TRANSPARENCY 45 INTERNATIONAL ENGAGEMENT 49 APPENDICES 51

Appendix 1: 2017 Audited Financial Statements (Jersey) 51

Appendix 2: 2017 Audited Financial Statements (Guernsey) 78 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

Deputy Charles Parkinson

President, 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 Jersey.

On behalf of the directors, I am pleased to submit the report and accounts for 2017. 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

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 CHAIRMAN

David Thomas

The Channel Islands Financial Ombudsman (CIFO) is the joint operation of independent financial ombudsman bodies established by law in Jersey and the Bailiwick of Guernsey. This is our report for the calendar year 2017, which is our second full year since we opened for business on 16 November 2015.

CIFO resolves financial services complaints - fairly and impartially - as an informal alternative to the courts.

In doing so, we help to support public confidence in financial services, within the Channel Islands and internationally. We are also an impartial source

of information about themes which arise from the complaints that are referred to us.

The annual statistics in this report were foreshadowed by the quarterly statistics published throughout the year. But this report now includes a breakdown of those statistics between Jersey and the Bailiwick of Guernsey.

As in 2016, a significant number of the complaints referred to us related to types of financial services

that the States of Guernsey and the States of Jersey excluded from our scope. It is for the States to consider whether or not the boundaries of our remit should be reviewed in the light of the data.

As previously agreed following consultation, published ombudsman decisions in complaints received from

1 January 2018 will name the financial services provider (FSP) concerned (but not the complainant).

Because many cases are resolved without a formal ombudsman decision, we hope to be able to publish

named-FSP data about cases resolved in other ways. The States of Jersey has recently legislated for this, and we are looking forward to developments in the Bailiwick of Guernsey.

A number of complaints upheld during the year related to a single investment firm, which failed to pay compensation because of insolvency. In the absence of coverage by professional indemnity insurance, insolvency may leave consumers without the redress to which they are entitled under a CIFO decision or a court judgment.

The board s key role is to preserve the independence of CIFO and the ombudsman, and I am glad to report that this has not come under threat. The board is prohibited by law from becoming involved in individual cases, but we do exercise strategic oversight of CIFO s efficiency and effectiveness.

As foreshadowed in last year s report we are conducting a rolling review of how things have gone since the office opened for business. CIFO already measures up well against international standards

but we have a continuous focus on improving the service provided by CIFO, including in relation to communication and timeliness.

Since CIFO was established we have kept the organisation lean. We will need to keep under review whether, notwithstanding improvements in efficiency, it will become necessary to increase resources in order to fulfil effectively all aspects of CIFO s role.

We are also near the end of a four-stage consultation on CIFO s funding structure that will apply when the existing arrangements expire at the end of 2018. A high degree of consensus has emerged among stakeholders. We aim to adopt the new structure

in time for it to come into effect from 1 January 2019, subject to any necessary legislative amendments.

Financial ombudsman schemes operate worldwide. But CIFO is unique in covering two separate international financial centres. This provides flexibility and economies of scale, but doubles our workload

in dealing with two governments and two sets of stakeholders. We appreciate the ongoing support they have all given to us.

As we did last year, we will convene public meetings in Guernsey and Jersey, to discuss this report and answer any questions. This is part of our ongoing commitment to transparency and to engagement with our stakeholders.

I am grateful to the other members of my board for their

time, effort and wisdom. They and I thank the Principal

Ombudsman and all the members of the team for their

hard work in resolving complaints and in helping CIFO

to evolve and mature, to effectively meet the particular  4 needs of the Channel Islands environment.

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

Just when you think that your environment is settling down and visible patterns of activity are becoming clearer, new surprises emerge to remind us that change is the only constant in the financial services sector of the 21st century.

While the UK s Brexit decision will undoubtedly have implications for the financial sectors in the Channel Islands, that impact is not yet clear. However, there are other changes, some local, some global, that we are seeing from our perspective that are having an impact on financial consumers that are served in or from the Channel Islands.

Given the global focus and reach of the international financial centres of Guernsey and Jersey, it should not be surprising that some international trends and issues are reflected in the complaint themes we encounter. Such trends include the consolidation of established players in the financial sector through relocations

and mergers and acquisitions, the advent of new applications of financial technology (FINTECH) in the retail financial services space, the extended period

of low interest rates driving depositors and investors further up the risk curve, and the regulatory focus

on FSPs ability to clearly identify their customers identity and addresses to meet know your client

and anti-money laundering requirements. All these

trends and issues, and others, have been visible in the complaint issues brought to CIFO in 2017. The pattern of complaints we reviewed are also entirely consistent with the experiences of our international counterparts, with banking generating the most complaints given the large customer base and frequent points of customer contact for payments and account transactions. Investment suitability is the most significant single complaint theme in the investment, life insurance and pension sectors, while claims adjudication dominates the health and property & casualty insurance sectors. Non-bank credit, while currently unregulated in the Channel Islands, falls within CIFO s remit and has proven to be an area where we have reviewed some challenging and concerning circumstances. Regulatory developments underway in both Guernsey and Jersey will bring welcome clarity of regulatory expectations to this area of financial services which is often serving the more vulnerable people in our society.

The volume of complaints reaching CIFO in 2017 was significantly less than the volumes from 2016, and

more in line with initial expectations when plans for the office were made. On the other hand, the proportion of complaints that were within the remit set for us by the States of Guernsey and States of Jersey increased more than four-fold. So the number of new cases opened in 2017 approached the volume experienced in 2016 which outpaced our capacity and led to an accumulation of cases awaiting review by our team. The team made this caseload a key priority for 2017.

With a combination of additional case handling capacity and a 20% year-over-year improvement in staff case handling efficiency, our team was able to close 79%

more case files in 2017 than in 2016, and yet this was only enough to address the new case volumes we experienced in the year. As a result, the overall level of inventory of case files under review has remained at the level that built up during 2016. The focus for our team going forward

will be to make headway in closing more case files

each week than we receive and absorb the inevitable, and hopefully only occasional, batch of complaints we receive that relate to a single issue, so-called multiple complaints . The unexpected arrivals of these multiple complaints, involving many complainants relating to a single complaint issue and a single FSP, have put a strain on our case handling capacity. While we are often able

to leverage our analysis across the cases, the individual circumstances and loss calculations, coupled with the other stakeholder and expectation management issues that can arise when you have a group of similarly-affected complainants, mean that these types of complaints

are particularly intensive. Efforts continue to address

the pipeline of cases and to shorten the time it takes to resolve complaints.

Over the course of 2017, we adopted several new  that CIFO takes to fair and reasonable resolution of the approaches to tackle the volume of case files. We added  conflicts that can arise. These case studies are selected

a case file administrator role to the team to tackle the up- to illustrate typical issues arising from the provision of

front aspects of our complaint review process, providing  certain financial services and also serve to highlight

faster confirmations of receipt of complaints and faster  important aspects of our dispute resolution role. The

mandate screening to advise those we are unable review  new database on our website will also provide an on-line

under our laws. The new role also freed up the three case  search capability for our case studies as the published

handlers to focus more on their existing inventory of case  collection grows. Both of these initiatives, published

files. We partnered with the Jersey Law Institute to take  ombudsman determinations and case studies, are part

on part-time legal interns. The interns, who joined our  of our ongoing commitment to transparency of CIFO s

team in Q4 of 2017, have quickly proven to be effective  operation, complementing the transparency of our

at supporting the rest of the team with legal and case  governance which already includes public disclosure of

analysis and lending general support to keeping up with  our financial accounts, board attendance, board minutes,

the case administration load. and the personal expenses of the directors and chief

executive. In our performance of CIFO s public interest

We have been careful to allocate appropriate resources  mandate, what we do is very important, but so is how we

to training our staff, both existing and new, in relevant  do it.

skills and technical issues. We partnered with The

Resolution Centre in Jersey, the Jersey Law Institute,  We are very gratified to have received continued support

and Queen Margaret University in Edinburgh to bring  from all stakeholders, both in the day-to-day contact professional mediation training to Jersey. Alongside  to resolve complaints and in the stakeholder briefings

staff from various other offices in Jersey, CIFO s entire  and consultations which provide the important industry

team took part in training that focused on the skills and  and consumer input to our current and future funding confidence development to engage with parties in difficult  structures. We are mindful of the impact our work has on situations. As most of CIFO s complaints are successfully  others and we seek to ensure that we are both responsive resolved through mediation rather than ombudsman  and accountable for the effective performance of our role determination, these skills are critical to our effectiveness.  and for the resources given us to perform that role.

All complaint-handling staff successfully completed the

intensive course and will receive their Chartered Institute  The independence of our office is critical to our

of Arbitrators (CIArb) and Civil Mediation Council (CMC)  effectiveness and continues to be well protected by designations in Q2 of 2018. This development is not only  our board of directors. CIFO s chairman and the other

an important capacity-building initiative for CIFO and  directors are continually vigilant in ensuring that our

our team, but also an important development for Jersey,  statutory role is performed effectively and that our

reinforcing an alternative approach to dispute resolution  independence is protected from untoward influence.

which is increasingly being embraced by various players  An ombudsman must be, and must also be seen to be,

in the community. independent in order to garner the public confidence

required to perform the role. Their protection of CIFO s

Our team continues to evolve and adapt to CIFO s pan- integrity and their on-going guidance to management,

island nature and the needs of our various stakeholders.  ensures on behalf of all stakeholders that CIFO continues

Now that people across the Channel Islands are  to evolve and delivers the promise of fair and reasonable somewhat more familiar with our role, the amount of  resolutions to individual complaints. By so doing, they help

energy devoted to stakeholder relations and outreach has  CIFO to enhance the reputation of the financial sectors in lessened a bit enabling our small team to devote some  the Channel Islands. For this, we all owe CIFO s board our

effort toward other important tasks that are important to  thanks.

leveraging the value of CIFO s work. This past year, CIFO

began to publish ombudsman determinations on CIFO s  To our staff, we continue to combine building and refining

website. These are the actual written decisions on cases  the infrastructure, policies and procedures of our

that could not be resolved between the parties through  office with simultaneously resolving a large number of

facilitated settlement or mediation. A new searchable  consumer complaints that find their way to us. It has been database is under construction to provide easy access  a tough year beset by various personal and organisational

via CIFO s website to our written decisions organised  challenges, but our small team can be justly proud of our

by theme. Going forward, CIFO will identify the FSP in  continued progress and our efforts to deal effectively with published determinations for complaints referred to  simultaneous multiple complaints and the review of CIFO s

our office on or after 1 January 2018. The identity of the  funding structure. We look forward to continuing to lay the complainant will never be disclosed. foundation for our future work; while continuing to bring

to both parties a fair outcome through the application of

We are also making an effort to publish more case studies  a fair process. This is a complex role that the CIFO team

on our website and in our annual reports. Short and  continues to approach with great commitment, energy readable, these are based on the complaints referred to  and integrity. For that they deserve our ongoing support

our office. They are a useful resource for all stakeholders  and appreciation. Well done.

to help them better understand the potential pitfalls

that can arise and to better understand the approach  6

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 Financial Ombudsman HOW WE WORK

OUR STAFF

Our staff with a wide variety of experience

and training in financial services, law, finance, consumer research and policy, dispute

resolution and regulatory compliance review and investigate unresolved complaints about financial services providers (FSPs) in or from the Channel Islands.

Douglas Melville

Principal Ombudsman & Chief Executive

Sophie Watkins

Manager, Administration & Stakeholder Relations

George Butler Financial Accountant

Dominic Hind Case Handler

Richard Langlois Case Handler

Ross Symes Case Handler

Dillon Pestana Legal Intern

Juliette Raynier Legal Intern

Jessica Toudic Summer Intern

Heather Rushton Administration Officer

Oana Lupu

Case File Administrator

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 12). 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

Back row: Dominic Hind, Dillon Pestana, Richard Langlois, Ross Symes, Juliette Raynier. Front row: Heather Rushton, Sophie Watkins, Douglas Melville , George Butler, Oana Lupu

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 credit reporting agency 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

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)

OPERATIONS

YEAR IN REVIEW

2017 Our second full ycomplaints than in 2016 but with a significantly higher (fourear of operation saw CIFO tackling fewer ne-fold w increase over 2016) proportion of complaints falling within CIFO s

remit thereby becoming cases for review by CIFO staff. As a result, the total caseload faced by the office was similar to that experienced in 2016. The team met this challenge closing 79% more case files in 2017 as in 2016. This was made possible through the addition of a case handler to the team at the beginning of 2017 and a 20% year- over-year increase in individual case handler efficiency. The team closed virtually the same number of cases (196) as we opened in 2017 (197). However, despite this significant year-over-year increase in case closures, by only being able to close the volume of cases that came in during 2017, the inventory of cases under review that had already accumulated by the end of our first year of operation in 2016

was no lower at the end of 2017. This remains the key priority for CIFO staff to address.

In general, we have been successful in handling the weekly volumes of in-bound complaints and, for those complaints found to fall within CIFO s statutory remit, handling the weekly volume of cases we open. The unexpected arrivals of multiple complaints, those from many complainants relating to a single complaint issue and a single FSP, has put a periodic strain on our case handling capacity and has hampered our efforts to tackle the cases already with our office awaiting review. We also continue to expend significant effort dealing fairly and empathetically with the large number of complaints rejected as falling outside of our remit as set by law. We explain to affected customers why we are unable to review their specific complaint and, where appropriate, refer the consumer to other options they may wish to consider to pursue their complaint.

As noted earlier in this report, we adopted several new approaches

in 2017 to tackle the growing caseload including the addition of a case file administrator role, engaging two part-time legal interns and significant investment in training and development for the team.

We are seeing the benefits of these efforts in terms of case handler efficiency, faster case file completions and lower average age of case file inventory. Even with individual case handler file closures up 20% year-over-year it will take time, and additional capacity, to work through the accumulated case inventory which continues to await a case handler to begin work on a new file.

We expect to be challenged in 2018 as the accumulated inventory of complaints on hand in Q4 of 2017 were brought through our intake process, screened against CIFO s mandate, and those complaints deemed in-mandate have now become active case files on the desks of our case handlers with the clock running.

POLICY ISSUES ARISING

We continue to identify policy issues through our complaint resolution work and escalate those issues to CIFO s Board of Directors and, where appropriate, to both regulators and governments.

During 2017, CIFO experienced the situation where a FSP failed to pay

the compensation awarded through a number of binding ombudsman determinations. At the time, the FSP concerned was under the control  

of a court-appointed administrator and was essentially insolvent.  14

Under normal circumstances, there would be recourse to a professional indemnity (PI) insurance policy held by the FSP as required by the regulator. In our experience, such policies are not paying out to consumers on complaints reviewed by our office. The reasons for this negative outcome vary and include the FSP s alleged failure to maintain the payment of premiums, alleged failure of FSP management to inform the insurer of the complaint issue on a timely basis, or insurance policy exclusions for losses caused by fraud or high-risk investments. Given the nature of the business conducted in the international financial centres of Jersey and Guernsey and the focus on attracting and serving high-net-worth investors, it would not be surprising to see high-risk investments in many investors portfolios. The sufficiency and suitability of professional indemnity insurance is an ongoing issue that CIFO has noted and will continue to share perspectives as they arise from our complaint experience with both regulators and governments.

Complaints referred to CIFO that fall outside our mandate remain a matter of concern and frustration for affected complainants. We continue to draw attention to the differences in coverage for complaints between Jersey and Guernsey. As a pan-island institution, we strive to ensure a consistent experience for consumers and FSPs across the Channel Islands to the extent the laws provide. While the differences in the mandate coverage between the islands have not yet been demonstrated to be a problem in statistical terms, anecdotally we are aware that some consumers have been unable to have their complaints reviewed by CIFO due to the different coverage provided by CIFO in each of Jersey and Guernsey as illustrated in the table on page 11 of this report. This is in addition to the many complaints which fall outside CIFO s remit in both islands due to the exclusions set out in our legislation by the States of Jersey and States of Guernsey. Complaints affected by these exclusions are recorded in our complaint statistics as rejected owing to exempt financial services such as trust/fiduciary and exempt investment funds.

When a financial services provider applies good practice to the resolution of complaints, it makes a good-faith effort to provide appropriate redress for losses arising from any errors or service issues it may have caused. Such FSPs ensure that their customers are made aware of problems when they arise, signposted appropriately to internal complaint handling procedures, and if the matter is not resolved by the FSP to the customer s satisfaction, informed of where to go for an independent and impartial review of their unresolved complaint. This would be consistent with the laws  

that created CIFO, but also with the spirit of fair and reasonable complaint handling that led to CIFO s creation in the Channel Islands. However, we have seen a few instances where FSPs have not approached complaint handling in accordance with this spirit. Whether or not a complaint has yet been referred to CIFO, FSPs can reasonably be expected to adopt an approach to complaint handling that treats their customers fairly and reasonably.

In particular, we are concerned with any practice by FSPs which could obscure the impact of a problem from consumers, or attempt to achieve settlement with consumers without full and fair disclosure of the nature and financial impact of the problem. The use of offers to settle matters, whether involving a formal customer complaint or not, for amounts CIFO would not consider fair and reasonable upon review, is particularly offensive. The practices are generally described as goodwill gestures and without prejudice and formalised with customer-signed releases of FSP liability. We encourage any financial consumers faced with such a situation to contact our office for information and guidance on how to activate the proper complaint handling procedures to achieve a fair and reasonable outcome. We would be pleased to let consumers know whether the approach being taken by their FSP is consistent with how we would approach it. FSP offers to settle with their customer made conditional upon the customer complaint not being referred to CIFO for review are particularly concerning and inconsistent with the effective function of CIFO s mandate.

Widespread adoption of good practice in internal complaint handling by FSPs would bring multiple benefits. It would improve both the culture and operational approach to complaint handling by FSPs and thereby reduce the number of customer complaints referred to CIFO. For those complaints referred to CIFO, an effective internal review of the merits of a complaint and what would constitute fair compensation means that much of the information relevant to a subsequent review by CIFO will have already been assembled. This will likely increase the proportion of FSP settlement offers accepted by customers and result in a lower proportion of those complaints being appealed to CIFO. Better internal complaint reviews means better FSP complaint documentation and faster complaint reviews by CIFO for those complaints that are appealed. Fair FSP offers to settle complaints with their customers, even if they are still appealed to CIFO,

will presumably lead to fewer CIFO mediated settlements and decisions for more compensation than what the FSP has already offered (an important metric which CIFO makes transparent through our quarterly and annual complaint statistics). At the very least, FSPs that are engaged in resolving the dispute make for faster CIFO mediated resolutions and lower overall costs of dispute resolution. All of these are worthy objectives and in the best interest of financial consumers, FSPs, and the reputations of the financial sectors in the Channel Islands.

Another policy area that warrants comment from CIFO s complaint experience in 2017 is the non-bank lending sector. While currently unregulated in Guernsey and Jersey, the non-bank lending sector falls within CIFO s statutory remit. CIFO reviewed a number of

complaints in 2017 that raised general concerns about market conduct and the existence of credit providers operating with what we concluded were unfair terms and conditions. The complaints  16

also highlighted a concerningly low level of financial literacy amongst some local consumers in the Channel Islands. Both of these observations have been shared with governments and regulators. We note that work is underway in both Guernsey and Jersey to regulate non-bank credit. This will be a welcome change which will clarify market conduct expectations and enhance both consumer protection and CIFO s ability to seek redress where warranted.

Finally, a long-standing policy issue that affects the performance of our role, and remains unresolved, is CIFO s ability to obtain certain sensitive information from FSPs, regulators, government agencies, and law enforcement that is occasionally required for our investigations into complaints against FSPs. CIFO s legislation provides an effective gateway for the sharing of confidential information in CIFO s possession that can assist other official bodies like the regulators and law enforcement in the performance of their duties, but the legislation governing these bodies prevents any reciprocity in most cases. We have long sought solutions to these challenges. Our requests for policy or legislative change have been supported by industry stakeholders who understand the opportunities such change would bring for increased efficiency and the ability to resolve highly sensitive case files in an appropriate, confidential and timely manner.

STAKEHOLDER OUTREACH

During 2017 our stakeholder outreach was largely focused on two key areas, the annual meetings in Guernsey and Jersey following the publication of our 2016 Annual Report and the several rounds of stakeholder consultations on the future funding structure of CIFO described in more detail below.

We continue to engage with industry and community stakeholders across Jersey and Guernsey speaking to groups and sharing the learnings from our complaint resolution work, but the initial phase of raising awareness of our existence is over. Our efforts have evolved to help stakeholders in industry and the community ensure that consumer issues are fairly and impartially resolved in a timely and efficient manner. We are also sharing our insights to help raise the general level of consumer awareness in the hope of averting future disputes and unnecessary financial loss.

The media in the Channel Islands have been very responsive and effective at using the information we publish to inform local residents about our mandate and about the issues we see that give rise to financial consumer disputes. We are proud to contribute to raising the general level of financial consumer awareness and financial literacy in the Channel Islands in partnership with other stakeholders.

FUNDING

In April of 2017, CIFO embarked on a four-stage consultation process with stakeholders to identify a revised funding structure to take effect after 31 December 2018, when the current funding structure that was established by both governments before CIFO commenced operation, and which was extended for an additional two years in late 2016, expires.

By the end of 2017, this extensive consultation process was well- advanced and a new funding structure was proposed by CIFO s Board in the light of the helpful views expressed by stakeholders during the three previous stages of the consultation. Stakeholder input had helped to significantly narrow the issues and options, and we are grateful to all those who contributed to the process.

The general consensus arrived at following completion of three of the four stages in the consultation was that stakeholders preferred a funding structure that: is simple and easy to understand; is easy and low-cost to administer; and avoids undue volatility. They were broadly content to continue with:

a fixed charge (by way of annual levy) to be paid by all FSPs that can be identified from the registers maintained by their respective financial services commissions; plus

a user-pays charge (by way of case fees) to be paid by those FSPs about which cases are handled by CIFO.

Stakeholders accepted that a fixed charge payable by all FSPs, whether they have any complaints or not, avoids undue volatility. It also recognises the benefit all FSPs derive from the increased consumer confidence created by the existence of CIFO. But a majority favoured revising the existing levy system, where the total levy is first divided between the two islands and is then divided among the relevant FSPs within each island. They preferred a structure under which the total levy is just divided among the relevant FSPs across both islands. Subject to that approach, stakeholders considered that any levy should continue to be shared according to the basis of the sectors for which registered providers are licensed or registered. They accepted that there is insufficient independent data to enable any levy to be shared by the size or market share of particular sectors or individual registered providers.

Accordingly, the final consultation paper (stage 4) issued in April 2018 proposed a revised new funding structure which combines:

a fixed charge (by way of annual levy), to be divided among all relevant FSPs in both islands, so that similar FSPs in each island pay the same amount; and

a user-pays charge (by way of case fees) to be paid by those FSPs about which cases are handled by CIFO.

Some stakeholders raised concerns about case fees increasing beyond the levels that came into effect from 1 April 2018. The final consultation paper sought further views from stakeholders on the appropriate level for case fees, and hence the proportion of CIFO s total funding that is raised on a user-pays basis.

The proposed new funding structure retains the following features of the existing structure:

Division of the levy on the basis of the sector(s) of activity carried out by an FSP.

50:50 weighting of the total levy raised between the banking sector and the non-banking sectors.

Zero-rating of FSPs that are sufficiently unlikely to generate a complaint. Lower case fees for FSPs that have paid the levy.

It has been proposed to implement the new funding structure to take effect from 1 January 2019, without a transition period, subject to completion of the necessary legislative changes in each of Guernsey and Jersey.

OFFICE INFRASTRUCTURE DEVELOPMENT

With the implementation of our complaint management system (CMS) on 1 January 2017, much effort went into learning what the new system could do for us in terms of our day-to-day complaint recordkeeping as well as quarterly reporting for the board of directors and our publication of quarterly complaint statistics. The ability to query the inventory of complaints and case files also gave management improved insight into the status of individual cases under review and our overall inventory of case files.

During 2017, we commenced work to increase CIFO s information security and develop the policies and procedures required to achieve an information security certification level comparable to those of similar agencies in the UK. By the end of the year, the audit had been completed and the required policies and procedures were being developed to enable certification in early 2018. This coincided with our work to align to new data protection standards.

LOOKING AHEAD TO 2018

The primary focus of the entire CIFO team for 2018 will be to tackle the accumulated inventory of

case files and thereby reduce the overall time it takes to resolve new complaints. Assuming that new complaint volumes remain steady, we hope to continue to improve our efficiency through the various initiatives we started in 2017 including a new staff role, the engagement of legal interns, and enhanced training in mediation skills to promote successful earlier resolutions of complaints through facilitated settlements. The combination of these initiatives should see the team able to close more case files in 2018 than we did in 2017 and make further progress toward reducing the accumulated case file inventory.

Another significant project will be the completion of the funding structure consultation mid-year and commencement of the process to secure any required legislative changes to enable the new funding model for implementation by year-end to become effective 1 January 2019.

CIFO s transparency will be enhanced with the reporting of complaint statistics on an island-specific basis. Q1 of 2018 will be the first time that CIFO will publish quarterly statistics showing the complaint experience in each of Jersey and Guernsey. We will pursue further enhancement of our transparency and outreach activities through publication of our first ombudsman determinations on a named-FSP basis and completion of the on-line search database to enable easy access to published determinations and case studies through CIFO s website. Populating the database with ombudsman determinations and additional case studies will be a priority.

One final item related to transparency is CIFO s ability to publish complaint statistics on a named-

FSP basis. CIFO s board of directors had intended to commence the reporting of summary complaint statistics naming FSPs in 2018. A lack of legislative clarity in both Jersey and Guernsey called into question CIFO s statutory power to do so. The legislative change required to enable publication of named-FSP summary complaint statistics was approved by the States of Jersey in Q1 of 2018 and is under review in Guernsey.

In terms of CIFO s infrastructure, in particular our information systems, policies and procedures, the priorities for 2018 will include completion of our Cyber Essentials Plus information security certification and our preparations for the General Data Protection Regulation (GDPR) which comes into force on 25 May 2018.

In Q4, we hope to relocate within our current building to new premises that will enable the entire CIFO  

team to once again be co-located bringing the benefit of continuous informal discussion on case files as  20 the team seeks to accelerate resolutions while maintaining the quality and consistency of our decisions.

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

STATISTICS CIFO and supplements the quarterly complaint statistics

regularly published by CIFO on our website.

2017

The volume of complaints received by CIFO in 2017 was lower than our experience in 2016 and more in line with

the anticipated complaint volumes when CIFO was in the planning phase prior to commencement of operations in late 2015. The lower complaint volumes offset the significant increase in the proportion of complaints which

fell within CIFO s remit compared to 2016. As a result, on balance, the workload faced by CIFO staff reviewing in- mandate case files was comparable in 2017 to that faced in 2016.

The annual complaint statistics are presented here in our annual report on an island-specific basis for the first time showing the distinct complaint experience in Jersey and the Bailiwick of Guernsey (including the islands of Alderney and Sark). We have also reorganised, modified, and added to the data presented based on feedback received on our 2016 annual report.

Compared with the quarterly statistics published for 2017, 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.

2017 COMPLAINT STATISTICS SUMMARY

246 Opening Complaints on Hand

Stage 2 134 Enquiries 678 Received

Stage 1 Complaints

0 StaInitial Rge 3eview as at 31 December 201754  mandate

Rejected as out of

Awaiting  Complaints under initial review Total  Withdrawn customer  Rejections  by documents/

consent as out of  complainant

mandate

Appears within mandate

Stage 4  441 39 FSP Document Request as at 31 December 2017

72  3  Rejecmandatted e as out of

Waiting for documents from FSP Pending further review against

mandate Within mandate

Case Fee Payable

2017 COMPLAINT STATISTICS ANALYSIS

Table 1: Complaints Received - Location of Financial Services Provider

Jersey 305 45% Guernsey 342 50% UK & Rest of World 31 5% Grand Total 678 100%

This section of the 2017 statistics analysis provides detailed information concerning all complaints about a financial services provider that have been received by CIFO whether or not they are ultimately deemed to fall within CIFO s statutory mandate.

Of the 678 complaints received by CIFO in 2017, 647 (95%) were against financial services providers operating in or from within the Channel Islands, 45% in Jersey and 50% in Guernsey. 31 (5%) operated in or from the UK or rest of the world. When CIFO receives a complaint against a financial services provider operating outside the Channel Islands, it will

be referred to the most appropriate financial ombudsman service or regulator within that jurisdiction.

Table 2: Complaints Received - Location of Complainants

Jersey 102 15% Guernsey 63 9% UK & Rest of World 513 76% Grand Total 678 100%

CIFO reviews complaints about financial services provided in or from the Channel Islands. The complainants can be from anywhere in the world. Of the 678 complaints received by CIFO in 2017, 165 (24%) were from complainants residing in the Channel Islands, 15% in Jersey and 9% in Guernsey. 513 (76%) were from complainants residing outside the Channel Islands in the UK or rest of the world.

Table 3: Complaints Received - Type and Origin of Complainant

Jersey Guernsey UK & Rest of World Total Consumer 92 90% 59 94% 497 97% 648 96% Microenterprise 10 10% 4 6% 13 3% 27 4% Trustee 0 0% 0 0% 3 1% 3 0% Charity 0 0% 0 0% 0 0% 0 0% Other 0 0% 0 0% 0 0% 0 0% Total 102 100% 63 100% 513 100% 678 100%

Of the 678 complaints received by CIFO in 2017, 648 (96%) were from consumers. Only 27 (4%) were from microenterprises and 3 from trustees. The proportions were not significantly different for Jersey, Guernsey, and the UK & rest of the world although Jersey had the highest proportion of microenterprise complainants at 10%.

Table 4: Complaints Received - Sector of Business Activity

Jersey Guernsey UK & Rest of World Total

Banking 216 71% 22 6% 9 29% 247 36% Trust/Fiduciary 13 4% 205 60% 0 0% 218 32% Insurance 7 2% 66 19% 7 23% 80 12% Investment/Funds 44 14% 24 7% 4 13% 72 11% Pensions 6 2% 17 5% 6 19% 29 4% Non-Bank Money 17 6% 5 1% 1 3% 23 3%

Services/Credit

Not Financial 2 1% 3 1% 4 13% 9 1% Services Related

Grand Total 305 100% 342 100% 31 100% 678 100%

Of the 678 complaints received by CIFO in 2017, 36% related to the banking sector. The proportions by location varied widely with Jersey having 71% of complaints from the banking sector while Guernsey had only 6%. This contrasts significantly with the second most prevalent sector, trust/fiduciary, which accounted for 32% of the overall total - which was 60% of the complaints in Guernsey but only 4% in Jersey. Of the remaining complaints, 12% related to the insurance sector, 11% to the investment/funds sector, 4% to the pensions sector, and 3% to the non-bank money services/credit sector. The relative proportions attributable to each sector differed significantly between Jersey and Guernsey.

The columns in Tables 4, 5 and 6 show the location from where the financial services were provided.

Table 5: Complaints assessed that did not become cases

Jersey Guernsey UK & Rest of World Total

Rejected as Out of

137 83% 283 97% 21 95% 441 92% Mandate

Withdrawn by

28 17% 10 3% 1 5% 39 8% Complainant

Grand Total 165 100% 293 100% 22 100% 480 100%

Of the 678 complaints received by CIFO in 2017, 480 complaints (71%) did not become case files. Of those 480 complaints, 92% were rejected as falling outside of CIFO s statutory mandate. 8% were withdrawn by the complainant. The proportions differed between Jersey and Guernsey with Guernsey having a higher proportion (97% compared with 83% for Jersey) of complaints rejected as out of mandate. Jersey had a higher proportion of withdrawn complaints (17% compared with 3% for Guernsey).

Table 6:  Why complaints did not become cases

Jersey Guernsey UK & Rest of World Total Exempt financial service (Trust

8 6% 201 69% 0 0% 209 46% company business / fiduciary)

Premature 72 51% 14 5% 2 8% 88 19% Time (Too Old) 24 17% 29 10% 2 8% 55 12% Time (Start Date) 7 5% 19 6% 5 20% 31 7%

Foreign financial service

10 7% 3 1% 21 48% 25 5% provider (non-Channel Islands)

Other 7 5% 10 3% 2 8% 19 4% Exempt financial service

5 4% 12 4% 0 0% 17 4% (Investment Fund)

Ineligible complainant 3 2% 3 1% 1 4% 7 2% Exempt Financial Service

4 3% 2 1% 1 4% 7 2% (Other)

Grand Total 140 100% 293 100% 34 100% 458* 100%

*Please note some complaints may have been out of mandate for more than one reason

Of the 458 complaints that did not become case files, 46% (most of which were from Guernsey) were rejected because they related to exempt financial services in the trust/fiduciary sector. The second most common reason for rejection was premature complaints (19%, most of which were from Jersey) where the FSP had not yet been provided with an opportunity to resolve the complaint or where the complainant s loss had not yet crystallised to establish a fair amount of compensation. Timing of the complaint, whether the complaint being too old or arising from before the statutory start times set for CIFO s mandate in each island, was the reason for rejection in 19% of complaints. The various other reasons for complaint rejection were minor by comparison.

Table 7: Case Files Opened - Location of Financial Services Provider

Of the 197 case files opened in Jersey 136 69% 2017, 136 (69%) were about FSPs

from Jersey and 61 (31%) were Guernsey 61 31%

about FSPs from Guernsey

Total 197 100%

Table 8: Case Files Opened - Location of Complainants

Of the 197 case files opened Jersey 48 24% in 2017, 48 (24%%) were from

residents of Jersey, 17 (9%) were Guernsey 17 9%

from residents of Guernsey, and UK & Rest of World 132 67% 132 (67%) were from residents of

the UK or rest of the world. Total 197 100%

Table 9: Case Files Opened - Sector of Business Activity

Jersey Guernsey Total

Banking 92 68% 16 26% 108 55% Insurance 4 3% 36 59% 40 20% Investment/Funds 27 20% 2 3% 29 15%

Non-Bank Money

10 7% 2 3% 12 6% Services/Credit

Pensions 3 2% 5 8% 8 4% Grand Total 136 100% 61 100% 197 100%

Over half of 197 case files opened in 2017 related to the banking sector (55%). This proportion varied significantly between Jersey and Guernsey with banking comprising 68% of opened case files in Jersey but only 26% of opened case files in Guernsey. In contrast, the insurance sector accounted for 20% of all opened case files but was 59% of opened case files in Guernsey and only 3% in Jersey. The investment/funds sector was 15% of all opened case files but was 20% of opened case files in Jersey and only 3% in Guernsey.

The columns in Tables 9, 10, 11, 12 and 13 show the location from where the financial services were provided.

Table 10: Case Files Opened - Product Areas

Jersey Guernsey Total

Current Account 57 42% 12 20% 69 35% Whole of life insurance

0 0% 17 28% 17 9% (investment)

Financial Advice 17 13% 0 0% 17 9% Mortgage 11 8% 3 5% 14 7% Health Insurance 0 0% 11 18% 11 6% Mutual funds, unit trusts,

9 7% 2 3% 11 6% collective investment schemes

Other investments 9 7% 1 2% 10 5% Home Insurance 1 1% 8 13% 9 5% Money Transfer 8 6% 0 0% 8 4% Consumer Loan 5 4% 2 3% 7 4% Credit card account 6 4% 0 0% 6 3% International Pension Scheme 2 1% 3 5% 5 3% Savings/Deposit Account 5 4% 0 0% 5 3% Payment Protection 3 2% 0 0% 3 2% Private Pension Product 1 1% 2 3% 3 2% Safe custody/safety deposit box 2 1% 0 0% 2 1% Grand Total 136 100% 61 100% 197 100%

Of the 197 case files opened in 2017, 69 (35%) related to current accounts. No other single product area comprised more than 10% of the total although combining all investment-type products and financial advice would account for 50% of all opened case files.

Table 11: Case files opened - issue

Jersey Guernsey Total

Poor Administration or delay 52 38% 15 25% 67 34% Mis-selling 31 23% 4 7% 35 18% Closure of account 18 13% 7 11% 25 13% Fees/Charges 9 7% 13 21% 22 11% Non-payment of claim 2 1% 15 25% 17 9% Disputed payment out 9 7% 2 3% 11 6% Refusal of service 8 6% 3 5% 11 6% Interest charged/paid 6 4% 2 3% 8 4% Transaction 1 1% 0 0% 1 1% Grand Total 136 100% 61 100% 197 100%

The most common issue in the 197 case files opened in 2017 was poor administration or delay with 67 (34%). Mis-selling was the second most common issue with 35 (18%) and arose across a wide range of products, particularly in the investment sector. Closure of account was the third most common issue coinciding with the high proportion of complaints relating to current account products in Table 10.

Table 12: Resolved case files - how they were resolved

Jersey Guernsey Total Determined 98 59% 12 39% 110 56% Mediated 64 39% 18 58% 82 42%

Withdrawn by

3 2% 1 3% 4 2% Complainant

Grand Total 165 100% 31 100% 196 100%

In 2017, CIFO opened 197 case files and successfully closed 196. Of the 196, 110 (56%) were resolved through Ombudsman determination. 82 (42%) were resolved through mediated settlements. 4 (2%) were withdrawn by the complainant after the complaint was opened as a case file. The data does not fully reflect the general experience of CIFO since commencement of operations in 2015 which has been that most case files resolve through mediated settlement. However, in 2017 a large number of case files related to a single insolvent FSP. Ombudsman determinations were required to establish the complainants legal rights to compensation should any assets be recovered. Adjusting the case file data to account for this multiple case scenario, only 28% of case files would have resolved through Ombudsman determinations while 68% would have resolved through mediated settlements. These figures are more consistent with CIFO s overall experience since inception.

Table 13: Resolved case files by outcome

Jersey Guernsey Total

Case Files Resolved in Favour of Complainant

for More Compensation than Previously  102 62% 10 32% 112 57% Offered by FSP

Case Files Resolved in Favour of Complainant

for Same or Less Compensation than  22 13% 6 19% 28 14% Previously Offered by FSP

Case Files Resolved in Favour of FSP 38 23% 14 45% 52 27% Case Files Withdrawn by Complainant 3 2% 1 3% 4 2% Total 165 100% 31 100% 196 100%

Of the 197 case files opened in 2017, 112 case files (57%) were resolved in favour of the complainant for more compensation than previously offered by the FSP. This figure differed significantly by island with Jersey at 62% and Guernsey at 32%. 28 case files (14%) were resolved in favour of the complainant, but for the same or less compensation than previously offered by the FSP. 52 case files (27%) were resolved in favour of the FSP. Again, this figure differed significantly by island with Jersey at 23% and Guernsey at 45%. 4 case files (2%) were withdrawn by the complainant after the complaint was opened as a case file.

Table 14: Percentage of cases resolved by days taken from receipt of FSP file

Percentage of cases

resolved by days  Mediated Decided Total taken

 30 28% 2% 13% 30-60 7% 2% 4% 61-90 9% 11% 10%  90 56% 85% 73% 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 case files separately from the determined case files and shows the breakdown of the proportions concluded in under 30 days from receipt of the FSP s file, 30-60 days, 61-90 days, and over 90 days.

44% of case files closed through mediated settlements in 2017 were closed in less than 90 days. This was true for only 15% of Ombudsman determinations. This figure was materially affected by the single complex multiple complaint situation where a significant number of case files were closed at the same time by Ombudsman determination after a protracted investigation.

Table 15: Amounts of compensation awarded up to statutory limit of £150,000

Maximum £150,000 Average £64,564 Median £53,127 Minimum £50

Of the case files that were resolved in favour of the complainant and involved financial compensation, the largest award for compensation was £150,000. The average award of compensation was £64,564 with the median amount £53,127. The lowest amount awarded was £50.

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

STATEMENTS FRAUDULENTLY  TheBPCmrauinsvetkasoicnmygearnadudt ahtean ptircoatteiocnti/ofnraud EX-PARTNER OBTAINS BANK

LEADING TO LEGAL ACTION   Liability for customer legal costs

In 2014, the required maintenance payments

between Mr F and his estranged partner were being determined, in support of which his financial position was disclosed to the courts. During this process, it was revealed that Mr F had opened a young savers account for his child with the FSP and for which his former partner was not a signatory.

Following the maintenance proceedings, the estranged partner visited a branch of the FSP and requested copies of the bank statements for the young savers account. When the FSP staff found that she was not a signatory on the account, the FSP advised her that Mr F would need to make the request.

The estranged partner then lied to the FSP staff member saying that Mr F was standing outside the branch and she left the building, returning shortly thereafter with a male companion. After the male companion gave the correct date of birth and post code to authenticate himself as Mr F, the statements for the young savers account were provided to him. It was subsequently discovered that this male companion was not Mr F.

After obtaining these account statements, the estranged partner then proceeded with a legal action against Mr F in the Petty Debts Court to obtain what she believed was her share of the funds in the account. This compelled Mr F to respond to the legal action to defend himself and the assets in the child s account, causing him to incur significant legal costs. After successfully winning the case in court, Mr

F complained to the FSP regarding their security measures and the matter was subsequently referred to CIFO for review.

Conclusion

The CIFO case handler concluded that the FSP s internal procedures to authenticate the customer were not followed. If they had, the impostor would have been exposed and the disclosure avoided. The release of the statements to the estranged partner through the impostor was both a breach of Mr F s

data protection rights and a failure of the FSP s security protocols. These were directly linked to Mr F s subsequent legal costs.

The CIFO case handler upheld the complaint, concluding that the FSP should refund Mr F for the legal costs to defend the action taken against him, and an additional £1,700 in compensation for the stress and inconvenience caused.

Both parties accepted the view and the case was closed. The matter was also referred to the data and privacy regulator in the jurisdiction.

Case Study #2

DEFAULT RESIDENTIAL MORTGAGE TERMS AND CONDITIONS APPLY WHEN CUSTOMER DELAYS

In late 2015, the complainants received a Choice Form from their FSP asking them to choose a replacement product upon the maturity of their current mortgage scheduled to occur on 31 December 2015. On the form it stated clearly that if a different product was not chosen, then a standard variable

rate of 6.8% would be applied to their mortgage, a significant increase to the 4.99% rate that was on their current mortgage.

Assuming their loan-to-value ( LTV ) rate was 75%, which was in fact incorrect, the complainants selected a different mortgage product from the available options and sent the form back to their FSP. However, there had been a 2-month delay between the complainants receiving the form and when they sent it back to their FSP. The form was only returned to the FSP on 1 December 2015.

Two weeks later, the FSP informed the complainants that their choice of a new mortgage product was not valid given their mistaken assumption that their LTV was 75%. The FSP attached a new form to be filled out by the complainants and warned them about the imminent mortgage expiry date of 31 December.

On 31 December the complainants current mortgage expired and with a different product not being chosen, the rate of 6.8% was activated, leading to an incremental interest cost of £615.70.

In February, the FSP received a copy of a

new valuation of the property, which cost the complainants £981.75, followed a week later by a letter confirming their choice for a new mortgage. After a new Choice Form was sent and received by the FSP, the new lower interest rate of 4.76% was applied.

Themes

 Banking

 Mortgage terms and conditions  Effect of customer delay

 Default interest rates

The complainants complained to CIFO seeking to recover the £615.70 incremental interest cost they incurred and the £981.75 they paid for the new property valuation.

Conclusion

When providing his initial view on the complaint, the CIFO case handler noted that the incremental interest cost could reasonably have been avoided had the complainant returned the original choice form within

a reasonable time. The complainants delay of the mortgage renewal process led to the expiration of the mortgage product despite the FSP s repeated attempts to contact the complainants in December. Regarding the cost incurred by the complainants for the new valuation to establish their current LTV, the CIFO case handler looked to the FSP s disclosed policy regarding automatic property revaluation.

In the UK it is standard practice for a property s previous value to be automatically carried forward to a renewed mortgage, however in the island this is not the case. A property valuation to establish the current LTV was required by the FSP as a pre-condition for the new mortgage and this had been clearly disclosed. The case handler decided not to uphold the

complaint.

The complainants and the FSP accepted the CIFO case handler s decision and the case was closed.

Case Study #3   T heBmaneksing

FRAUDULENT ACTIVITY WENT  Payment card fraud UNCHECKED LEADING TO    Customer responsibility for care and control

of card and PIN REIMBURSEMENT   Internal fraud controls

 Failure to mitigate loss

Mr B claimed to be the victim of a fraud in Hong Kong when a bank card he used exclusively to make payments on a UK mortgage was stolen. Mr B did not realise the card had been stolen as it was always kept in a safe in his residence along with the PIN code provided by the bank. The card, and the safe

it was stored in, were rarely checked due to their limited purpose. The unique circumstances which led to the thief gaining access to Mr B s home safe, while very interesting and illustrative of the risks of being administered with debilitating drugs in public drinking establishments, were determined by the CIFO case handler as not relevant to the question of responsibility for the losses incurred given the specific circumstances of this complaint.

Immediately following the theft of the card and PIN, there were a series of unusual transactions, including purchases from high-end fashion and beauty establishments, and withdrawals of cash over the course of a month, however Mr B was only made aware of the situation after a total of 73 suspicious transactions had already occurred, totalling £34,015.60.

The bank refused to release Mr B of responsibility for the losses on the basis that Mr B had breached the terms and conditions of his account by storing the PIN code with the card and not destroying the record of the PIN. Mr B complained to CIFO.

CIFO reviewed the bank s internal fraud control records and discovered that the bank was alerted by its own internal fraud control systems to various of these fraudulent transactions 22 times during

the period when the transactions took place. Two of those fraud alerts were triggered on the first day the transactions commenced after the theft of the card and PIN. However, the bank took no action. When the bank did finally contact Mr B, it was due to insufficient funds in his account to cover the transactions, not the fraud alerts that had been raised repeatedly by the bank s own internal fraud control systems due to the unusual transaction activity on the account.

Conclusion

Regarding the breach of the terms and conditions of his account, Mr B did clearly breach them through having the PIN number written down in the same location as the card. This was not in dispute. However, Mr B did appear to be the victim of a genuine fraud and the bank failed to either block his card or notify him of the suspicious transactions, which did not fit the normal profile of transactions on his account. The CIFO case handler concluded that the lack of action in response to the internal fraud alerts on the first

day the fraudulent transactions started was a serious failure by the bank. Had the bank acted on its own internal fraud alerts, it could have prevented most of the fraud losses.

CIFO decided to partly uphold the complaint and have the bank release Mr B from liability for all amounts lost to the fraudulent transactions after the first day when the two internal fraud alerts were generated and not acted upon.

Both parties accepted this decision and the file was closed.

Case Study #4  Themes

 Banking

SIMPLE FUNDS CONVERSION    Foreign exchange loss

FROM US DOLLARS (USD) TO  PRoeolartciounssthoimp emr asne arvgiecre inaccessible UK POUNDS (GBP) BECOMES A  Written apology warranted

SERVICE FAILURE PROMPTING

BOTH COMPENSATION AND A

WRITTEN APOLOGY

Mr and Mrs P reside in the Channel Islands and travelled to the UK on holiday. While they were in the UK they decided to convert some funds from USD to GBP and then move the funds to another account.

They gathered the relevant documentation needed and went into the closest branch of their bank in the UK to start the process. They were asked to return the following morning as the conversion would have to be confirmed by their relationship manager at their home branch in Jersey the next working day.

Mr and Mrs P returned to the UK bank branch the

next day to discover that their relationship manager had not been in contact. After the assistant in the UK branch had tried unsuccessfully to contact their relationship manager by phone, as he was away

from his desk, an urgent email was sent to him to contact Mr and Mrs P. As a result, Mr and Mrs P were left waiting in the UK bank branch awaiting a call from their relationship manager.

When no return call was received from their relationship manager, Mr and Mrs P phoned their Channel Islands branch to try and resolve the issue themselves and were again informed that their relationship manager was not available. They left the UK branch with the matter unresolved.

Mr and Mrs P again phoned their Jersey branch 2 days later and the assistant they reached spoke to their relationship manager. Their relationship manager refused to speak to them until he had something in writing . The Channel Islands branch had faxed and

sent the documents that Mr and Mrs P had originally brought into the bank. Mr and Mrs P felt that the letter they received from the bank explaining the exchange rates offered was overly computer-generated and

they wanted to speak with their relationship manager to agree on an exchange rate for the transaction.

After series of additional telephone calls, they were eventually able to convert the USD to GBP and arrange the transfer of funds to their other account.

This process had been a wholly unsatisfactory experience for Mr and Mrs P who then proceeded

to complain to the bank about how they had been treated. The bank did not satisfy their concerns and Mr and Mrs P brought their complaint to CIFO.

Conclusion

The case handler upheld the complaint regarding the poor service received and the inconvenience caused to Mr and Mrs P. The case handler spoke to both parties and a mediated settlement was reached as follows:

1. The bank was to pay £250 to Mr and Mrs P for the inconvenience caused to them.
2. The bank was to write a personal letter to Mr and Mrs P apologising for the inability to contact their relationship manager, lack of response during

the relevant time, and for the poor level of service they received.

Once we received confirmation that both had been done, the file was closed.

Case Study #5   T heHmeaelsth and dental insurance UNCLEAR WORDING OF    Cap on benefit amount payable

POLICY COVERAGE LIMITS    Interpretation of misleading or unclear

language against insurer INTERPRETED IN FAVOUR OF

POLICY HOLDER

The complainant, Mr Z, held a dental policy with his insurance company and had submitted a claim for dental work. Mr Z required major restorative treatment by a dentist; his treatment was ongoing at the time of the complaint.

The treatment cost a total of 20,340, for which the insurance company reimbursed Mr Z for 3,155. This led Mr Z to complain to the insurance company that their plan documents were misleading as to the amount customers would have covered.

The insurance company rejected Mr Z s complaint, stating that his claim exceeded the maximum annual benefit permitted by the policy. Mr Z complained to CIFO.

As a result of the lack of explicit clarity in the documentation, compounded by the communication from the insurance company s own employees, CIFO decided to uphold the complaint and have the insurance company set aside the compensation cap and pay 50% of the cost of the restorative treatment incurred by Mr Z during that policy year, less the

 3,155 that had already been paid to Mr Z.

Both parties accepted the decision and the file was closed.

Conclusion

Upon review of the terms and conditions in the insurance policy documentation, it was found that the language used by the insurance company was potentially misleading and confusing, particularly with respect to the interaction between two provisions referring to an annual cap on benefit amount and

a cap of 50% of the insured expense incurred

by the policyholder. When looking at the email correspondence between the two parties, it was also evident that the advice given by staff of the insurance company was also misleading and further contributed to the misunderstanding.

REJECTION OF INSURANCE CLAIM AND COVERAGE REVOKED

Mrs M contacted her insurance broker to file a claim for damage to the roof of her home. The damage was believed to be storm-related. This claim required a loss adjuster to assess the cause and extent of the damage.

The loss adjuster subsequently visited Mrs M s property to assess it in person, in the presence of her contractor, and later revealed than in his opinion, and in the opinion of Mrs M s contractor, the roof damage was not caused by a storm and thus the claim could not be accepted.

Mrs M then had another contractor conduct an inspection of the damage to support her insurance claim. This contractor also concluded the damage was not storm-related. It had already been reported to the insurance company that the previous contractor had agreed with the loss adjudicator in concluding the roof damage was not caused by a storm.

The insurance company thus decided to reject the insurance claim on the basis that the damage was not caused by the storm, consistent with the three expert opinions.

Mrs M complained to CIFO regarding the rejection of her claim.

A second complaint arose after Mrs M was completing an application to insure her grandson to drive her vehicle.

During the compulsory questions to be asked regarding criminal matters, Mrs M replied No to all the questions regarding her grandson and any

 Home insurance

 Loss adjustment cause of damage

 Customer obligation to provide accurate and

complete answers to questions

 Customer obligation to act in good faith

criminal convictions against him, indicating that he had no convictions. Then, after a routine background check, it was discovered that Mrs M s grandson had in fact been convicted of a drug-related crime.

When the insurance broker inquired about the discrepancy, Mrs M claimed that she believed the questions were relating only to driving offences. The auto insurance application on behalf of her grandson was rejected and her home insurance policy was revoked. She complained to CIFO.

Conclusion

Regarding the first complaint about the rejection of her insurance claim for the roof damage, CIFO did not have any evidence to call into question the opinions

of the three experts, two of which Mrs M had engaged herself, and so decided to not uphold that aspect of the complaint.

The second complaint was also not upheld following CIFO s review of the Policy Statement of Facts in the application. It asks about any criminal offence other than driving offences , leading CIFO to conclude that the insurance company did not act unreasonably when they rejected the motor insurance application on behalf of the grandson and subsequently cancelled the home insurance.

Good faith and the provision of accurate answers to clear questions are critical to the relationship between a customer and their insurer. This case was an example of what happens when both appear to be absent.

BANK HANDLING OF VULNERABLE CUSTOMER COMMENDABLE

In 2015, Mr P and his brother were planning to purchase a property with financial assistance from their mother. Mr P s mother signed a letter advising the bank that she would be providing a large amount of money to enable her two sons to purchase the property. Mr P s mother was elderly and lived in a nursing home. At the time the letter was provided, there was no indication of any issues with respect to her capacity to appreciate the nature of the transaction. Lawyers for the mother, who would have had professional obligations to determine her capacity to instruct them, had indicated they were happy for the transaction to proceed.

A few days later, when it came time for the funds to be transferred to finalise the house purchase, the bank, before executing the transfer of funds referenced in the mother s letter, attempted to contact the mother by telephone to verify the transfer in accordance with its internal procedures. The bank was unable to reach the mother by phone and became concerned about her capacity to understand the nature of the transaction; a concern reportedly shared by one of the sons.

The bank staff member took the extraordinary step of visiting the mother at the nursing home to verify the transfer instructions and confirm that she was fully aware of the implications of what she had previously signed. As a result of the visit, the bank was not satisfied that Mr P s mother had the capacity to understand the process and the implications of what she had instructed the bank to do. The bank therefore refused to execute the transfer of funds from the mother s account without a guardianship in place to protect her interests.

 Banking

 Vulnerable customer

 Protection against undue influence or

financial abuse

 Customer capacity to appreciate nature of the

transaction

The commitment to purchase the property was imminent and was already agreed to close on a certain day or the deposit paid would be lost. Mr

P paid £5,000 to the vendor in order to extend the closing date of the purchase and used that extension period to obtain legal guardianship for his mother at a further cost of £1,900. Once the bank was presented with instructions from the son as the legally- appointed guardian, the funds transfer was executed by the bank to enable the property purchase to close. Mr P considered that the bank had not previously informed him of any additional requirements in order to transfer the funds from his mother and made a complaint to the bank asking for reimbursement of the incremental costs of £6,900 he had incurred to close the property deal (£5,000 for the extension and £1,900 for the legal guardianship). When the bank did not agree he brought his complaint to CIFO.

Conclusion

After reviewing the case, CIFO did not uphold the complaint for the following reasons.

CIFO concluded that the bank has an obligation

to ensure that all transactions are authorised, meaning to ensure that the account holder or their guardian are fully aware of the nature and implications of transactions. It is also emerging good practice for banks to exercise due care in accepting instructions from vulnerable customers, especially in circumstances where transactions may be for the economic benefit of others, to make sure that the customer is able to appreciate the nature and implications of the transaction and is protected against potential undue influence or financial abuse.

Case Study #8   T heTmraevsel health insurance MIS-SOLD INSURANCE POLICY  Mis-selling

PROVIDED NO COVER TInetremrpsraentadt cioonnodfit mioinssleading or unclear

language against insurer

Mr B was planning a holiday to an African country to visit his daughter-in-law for 38 days. He contacted

the FSP by telephone to obtain health insurance. The FSP recommended he purchase a specific insurance plan (the policy ) they offered. Mr B bought the recommended policy. Later he complained the policy was automatically renewed without his consent, causing him financial loss paying for a renewed policy he did not need as his period of travel had concluded. His complaint to the FSP was not resolved and he brought his complaint to CIFO.

CIFO confirmed that the original insurance policy

was bought and activated in December 2015 and was renewed three months later in March 2016.

Mr B had originally telephoned the FSP and asked for a policy to cover him for only 38 days. When informed that he was unable to take out a policy for this specific length of time, he was told that the minimum period that a policy could be taken out for was three months. He was told when it comes to the three-month plan, we can only offer it on a quarterly basis . The relevant policy documentation reviewed by the CIFO case handler indicated that the policy was in fact an annual product. The case handler concluded that inaccurate information had been provided to Mr B.

The case handler also noted a second telephone conversation between Mr B and the same advisor from the FSP. In this conversation, Mr B was informed that he could view the terms and conditions of his new policy online within 24 hours of purchasing it. When he tried to do this after paying the premium for the policy, he discovered that he could not access the online terms and conditions. This was due to the FSP suspending his access until a valid address was provided. As he had no address in the African country other than his daughter-in-law s, which he did not know, he could not meet this requirement and so could not view the details of his policy after having paid for it.

The insurance company pointed out that, in the first telephone call, Mr B was asked to get in contact when your trip is over, and we will cancel your plan . He did not do this.

During the second telephone call, he was told the policy will automatically renew next year, and you will receive a reminder of this in advance . Considering that the policy was activated in December, the use of the expression next year was easily misinterpreted.

In addition, due to Mr B not being able to read the terms and conditions of the policy online, the case handler concluded it was reasonable to assume that Mr B would rely on this reminder prior to renewal.

However, a reminder was not sent to Mr B by the FSP before the renewal date of the policy.

Conclusion

In the end, it was a previously unknown aspect of this complaint that determined the outcome. During the detailed review of the policy documentation, CIFO s case handler noted that the policy sold to Mr B was exclusively intended for expatriates. The case handler concluded that this had not been explained to Mr B. The case handler also took the view that Mr B was a US citizen living in the US and was only going to the African country on holiday. Therefore, Mr B was not an expatriate living and/or working in an African country and thus would not have been covered by the policy in any event. CIFO s case handler concluded that

this constituted a mis-selling of the policy making

the previous aspects of the complaint essentially irrelevant.

The case handler also concluded that Mr B was owed the full amount of the premium paid for the original policy due to it being mis-sold. In essence, CIFO concluded that Mr B had been sold an insurance policy he was not eligible for. It was noted that it was indeed fortunate Mr B s trip to the African country had been without incident, or the nature of the complaint could have been far more complex, and the financial implications for the insurer much more significant.

The case handler s decision was accepted by both parties and the case was closed.

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

When combining an important public interest mandate with a strict need for independence, it is particularly important to demonstrate accountability and transparency. CIFO has already taken several steps to ensure that we are accountable for our performance of this role and to drive our commitment to continuous improvement.

CIFO Board Review

As mentioned in the 2016 Annual Report, CIFO s board of directors embarked on a review starting in Q4 of 2017 on the state of CIFO s operation at the two-year mark from our service s inception in November of 2015. At each quarterly CIFO board meeting, part of the strategy discussion time is to conduct a review

of CIFO s operation against one of the fundamental principles for effective financial ombudsman schemes set out by the International Network of Financial Services Ombudsman Schemes (INFO Network). These fundamental principles can be seen here

Making such ongoing reviews a part of CIFO s governance culture ensures that we stay focused not only on the high-level purpose of CIFO s mandate, but also on the various operational aspects which are critical to ensuring our service is effective, responsive, and continuously improving.

Adoption of, and Assessment Against, OA Service Standards Framework

The Board also considered the Service Standards Framework adopted by the Ombudsman Association (OA, formerly the British and Irish Ombudsman Association) in Q2 of 2017. CIFO, as an OA member

and supporter of standards of professional

conduct, assessed our operation against the new OA framework. While very pleased with the degree to which our young office already embraces the new framework s requirements, we identified three opportunities to improve our alignment to the OA framework. These areas included:

Clarifying CIFO s commitment to providing reasonable accommodation to those complainants requiring special assistance in making use of our free service and provide guidance on how to indicate the need for such accommodation;

Informing complainants of the opportunity to challenge our decisions; and,

Keeping users of our service updated on the status of the complaint and how long it is likely to take to reach resolution.

The first two items have been addressed with additional guidance to complainants provided through CIFO s website. The third has proven more challenging given the volume of complaints under review and limitations on CIFO s capacity but efforts are underway to improve our capacity, drive down the waiting times for reviews, and ensure that complainants are kept better informed of the status of, and likely time to resolution for, their complaints.

Listening to Stakeholders

A survey of CIFO stakeholders was conducted in late 2016 to ensure that the issues encountered by both parties to complaints reviewed by CIFO and their views on opportunities for potential operational

improvement were heard. The identified issues were analysed in early 2017 and formed the basis for the Board s conclusion that CIFO was working broadly as intended, although not resolving complaints as quickly, or in as personally accessible a manner, as could be reasonably expected. This conclusion was translated into action by CIFO staff. It provided the direction needed to prioritise numerous staff training and development activities as well as numerous operational initiatives, including the addition of more capacity, throughout 2017 that have already made a visible difference. The board intends to be vigilant to ensure that continuous improvement remains part of CIFO s operational culture.

Responding to Our Customer Satisfaction Survey

The expressed desire of complainants for more verbal contact with case handlers was noted and we conducted staff training throughout 2017 with outside ombudsman experts and mediation specialists to continually enhance the skills and confidence of our staff to meet the needs of complainants seeking an empathetic response to the sometimes complex and emotionally charged issues they bring to our office. On the other hand, financial services providers sought faster resolutions of complaints, an objective we constantly strive for without compromising the quality of our investigations and the settlements we mediate or, if required, ultimately determine. The training

staff undertook as an entire team helps the office deal more quickly with the high volume of complex complaints that are referred to CIFO and we have already seen an increase in productivity as a result. While we are focused on our role in improving complaint handling, we will continue to be highly dependent upon financial services providers to

assist with enabling faster resolutions by responding promptly to CIFO s requests for complaint files and our follow-up enquiries. The quality of FSP s own internal complaint handling, documentation of client interactions, and early engagement with CIFO during complaint reviews, all have a significant impact on the efficiency of the overall complaint handling process that includes both FSPs and CIFO. We will continue to work with stakeholders to ensure that both CIFO and industry engage in a constructive process of continuous improvement in this regard.

Informal External Review

In late 2016 and early 2017, management commissioned an informal external review of

CIFO s operation, including assessment of actual

case files, by two experienced financial ombudsman practitioners. This review, similar to the findings

from the customer survey, also highlighted similar opportunities for continuous improvement by our team. A masterclass was held in early 2017 to focus on some of the key opportunities identified during the external review including tone of communication, early verbal engagement with complainants, and frequent updating of complainants on the status of their complaint in

CIFO s process. The observed need to identify and develop effective means to deal with vulnerable complainants led CIFO to develop relationships with Mind Jersey and Samaritans, both are organisations with significant expertise in meeting the needs of vulnerable members of the local communities we serve. We continue to expand our networks in Jersey and Guernsey to be able to source needed expertise and to enable referrals to support agencies as may be appropriate in certain circumstances.

Transparency of Governance

CIFO remains committed to 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 here. Chairman and director remuneration and attendance record at board of director meetings is provided in this annual report. Minutes of board of directors meetings are posted on CIFO s website here.

We were pleased that the governments of both Jersey and Guernsey renewed their support for CIFO and their faith in its current governance by reappointing the chair and directors in January of 2018 for various staggered terms that will enable an orderly rotation to new directors in future thereby refreshing the governance

of CIFO with new perspectives on both our public interest mandate and on excellence in transparency and governance.

Transparency of Operations

In addition to the provision of annual audited financial statements, CIFO now publish final ombudsman determinations on its website here. We are currently focused on the timely resolution of the complaint files currently in our office, but the publication of more ombudsman determinations on CIFO s website will be a priority project for the summer interns we plan to engage for the summer of 2018. We also plan to publish more case studies. We have included eight case studies

in this annual report that illustrate well the range of banking and insurance complaints we deal with and the approach CIFO takes to achieving fair and reasonable outcomes in each unique circumstance.

CIFO is continuing its practice of publishing quarterly complaint statistics and, starting in Q1 of 2018, will show separate complaint statistics for each of Jersey and Guernsey as done for the first time in this Annual Report. Also new starting this quarter, CIFO will commence publishing ombudsman determinations

on a FSP-named basis. Complainants names are not published. A recent legislative change in Jersey will enable CIFO to publish summary complaint statistics on a FSP-named basis going forward. Once a similar legislative change is made in Guernsey, CIFO will add this new level of reporting to our demonstrated commitment to full transparency in CIFO s operations.

Attendance at Board Meetings

Regular in-person meetings of the board of directors were scheduled throughout 2017. Additional meetings by conference call were required during the year. All directors were in attendance for every one of the 4 meetings of the board of directors held in 2017.

DIRECTORS' ATTENDANCE AT 2017 BOARD MEETINGS

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

held attended absent rate

David Thomas (Chair) 4 4 0 100% Deborah Guillou 4 4 0 100% John Mills 4 4 0 100% John Curran 4 4 0 100%

DIRECTOR REMUNERATION 2017

David Thomas (Chair) £24,000 Deborah Guillou £6,000 John Mills £6,000 John Curran £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. In 2017 he was appointed as Jersey s first Charity Commissioner. In an honorary capacity he is a member of the boards of both public sector pension funds in Jersey, the Public Employees Pension Fund and the Teachers Superannuation Fund. He chairs the former s

investment committee, which oversees the management of the fund s assets of some £2.4 billion.

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) and non-voting member of the States

of Guernsey Transport Licensing Authority. 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).

48

INTERNATIONAL ENGAGEMENT

Given the international nature of the financial services sector in the Channel Islands, it is both appropriate and helpful that CIFO has formed relationships with various international bodies active in the area of financial Ombudsman practice, dispute resolution, and financial services in general.

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

CIFO is an active 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 here. CIFO s Principal Ombudsman was involved in the elected Committee providing governance for this international professional body, serving on the Committee since 2010 and, since 2013

as elected chairman. In September 2017 at the Annual General Meeting of the INFO Network, CIFO s Principal Ombudsman concluded his term of service, both on the Committee and as Chairman.

During Q1 of 2018, the INFO Network published a start-up guide for financial Ombudsman schemes co-written by CIFO s Chairman, David Thomas, and the former French Insurance Mediator, Francis Frizon.

The guide includes some material drawn from the initial creation and subsequent evolution of CIFO. It represents a significant contribution to the global practice of financial Ombudsmanry and has been very well-received by international players involved in the creation of new schemes in emerging markets. A copy of this substantial document can be viewed here.

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 viewed here. 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 EU s FIN-NET network

(the other being the Swiss Banking Ombudsman). CIFO attends 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 facilitate referrals of complaints from FIN-NET member schemes that appropriately fall within CIFO s remit to resolve.

Ombudsman Association (OA)

In 2016, CIFO became a member of the Ombudsman Association (formerly the British and Irish Ombudsman Association or BIOA) which represents both public and private sector ombudsman schemes in the UK, Ireland and British Territories. Details on this association can be seen here. 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 and collegial 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 in the past 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 (Guernsey)

Fairness of outcome... Fairness of process

CONTACT

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

AUDITORS

KPMG Channel Islands Jersey Office

37 Esplanade

St Helier

Jersey

Channel Islands

JE4 8WQ

Jersey: 01534 888891 www.kpmg.com/channelislands

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