Ask MAT: I work in a Jersey TCB, and we have a complaint from a trust beneficiary. Do the JFSC TCSP complaint rules catch this?

Ask MAT: I work in a Jersey TCB, and we have a complaint from a trust beneficiary. Do the JFSC TCSP complaint rules catch this?

MAT SAYS:-

• Thank you for a great question, and one that many firms get wrong.
• After careful analysis, I suggest that a TRUST BENEFICIARY is an eligible complainant and caught by the TCB complaint rules if the complaint is impacted by a TCSPs actions, and meets the JFSC 5-point test (shown below)
• The 5-point test says a COMPLAINT is a formal (eligible) complaint if it is -
• ANY ORAL OR WRITTEN EXPRESSION OF DISSATISFACTION and
• JUSTIFIED OR NOT, and
• FROM, OR ON BEHALF OF, A PERSON and
• ABOUT THE PROVISION OF, OR FAILURE TO PROVIDE, A SERVICE THAT RELATES TO TRUST COMPANY BUSINESS CARRIED ON BY THE REGISTERED PERSON, and
• ONE WHICH ALLEGES THAT THE COMPLAINANT HAS SUFFERED (OR MAY SUFFER) FINANCIAL LOSS, “MATERIAL” DISTRESS OR “MATERIAL” INCONVENIENCE.
• Please note I have also considered that the trust beneficiary is a customer and an eligible complainant. However, according to the JFSC’s regulatory framework, a trust beneficiary is not explicitly labelled as a "customer" in all contexts. Still, they are treated as such for AML/CFT and data protection purposes, as TCSPs must conduct CDD and maintain records on beneficiaries. In operational contexts, beneficiaries may be considered customers when directly interacting with the TCSP (e.g., receiving distributions or requesting information). TCSPs must act in their best interests and comply with the TCB Codes. For complaint management under CIFO, beneficiaries can be eligible complainants if impacted by a TCSPs actions, further aligning them with a customer-like status in specific scenarios. The exact treatment depends on the trust structure, the beneficiary’s role, and whether the TCSP provides services directly to them.

To answer the question, it is worth analysing what the JFSC says. Here are some key pointers

1. Financial services businesses need to know when THEIR CUSTOMERS are unhappy so they can improve.
2. Only the Channel Islands Financial Ombudsman (CIFO) or the law courts decide whether a complainant will be compensated by the business about which the complainant is complaining.
3. The JFSC align its complaint categories with those used by the CIFO
4. CIFO will only deal with an ELIGIBLE COMPLAINT as defined at Article 7 of the Financial Services Ombudsman (Jersey) Law 2014. (2014 law)
5. According to Article 7 of the 2014 law, an ELIGIBLE COMPLAINANT is an individual or entity that falls within the categories defined by the law.
6. Following the 2014 law, CIFO look to see if the financial services and the COMPLAINANT ARE sufficiently close as specified in guidance issued by the ombudsman and can be shown as follows
   • As a customer.
   • As a prospective customer; or
   • As specified in guidance issued by the ombudsman.
     • https://www.ci-fo.org/wp-content/uploads/2016/01/151114-Guidelines-on-sufficiently-close-relationships.pdf
   • In the guidance, the principal ombudsman considers that, save in exceptional circumstances, the relationship of the complainant to the relevant provider is sufficiently close and includes
     • TRUST BENEFICIARIES
7. The final test is whether a regulated financial services business has a Complaint from an eligible complainant that meets the following five tests
   • It is a COMPLAINT if it is -
     • ANY ORAL OR WRITTEN EXPRESSION OF DISSATISFACTION and
     • JUSTIFIED OR NOT, and
     • FROM, OR ON BEHALF OF, A PERSON and
     • ABOUT THE PROVISION OF, OR FAILURE TO PROVIDE, A SERVICE THAT RELATES TO TRUST COMPANY BUSINESS CARRIED ON BY THE REGISTERED PERSON, and
     • ONE WHICH ALLEGES THAT THE COMPLAINANT HAS SUFFERED (OR MAY SUFFER)
       • FINANCIAL LOSS,
       • “MATERIAL” DISTRESS OR
       • “MATERIAL” INCONVENIENCE.
8. The JFSC OR CIFO does not define the final two parts above; however, CIFO does offer some clues
   • Although CIFO does not provide explicit definitions for "material distress" or "material inconvenience" in its publicly available documents, such as its website or FAQS. However, these terms are referenced in the context of complaint resolution, particularly when determining compensation for complainants.
   • CIFO’s Approach to Material Distress and Material Inconvenience
     • CIFO’s role is to resolve complaints about financial services provided in or from Jersey, Guernsey, Alderney, and Sark, as established by the Financial Services Ombudsman (Jersey) Law 2014 and the Financial Services Ombudsman (Bailiwick of Guernsey) Law 2014. When adjudicating complaints, CIFO can award compensation for losses, including those caused by material distress or material inconvenience, if the complaint is upheld.
     • Material Distress typically refers to significant emotional, psychological, or financial hardship caused by a financial service provider’s actions or omissions. For example, distress might arise from severe stress due to financial loss, prolonged service disruption, or unfair treatment. While CIFO does not define the term explicitly, it assesses distress based on the complainant’s evidence and the severity of the impact.
     • Material Inconvenience: This generally refers to substantial disruption or burden significantly affecting a complainant’s ability to carry out everyday activities or access services. Examples include repeated service failures, excessive time spent resolving issues, or barriers to accessing funds. Again, CIFO does not provide a formal definition but evaluates inconvenience case-by-case, focusing on its tangible impact.
   • Further, the materiality terms are guided by:
     • Case-Specific Evidence: Complainants must provide details of the impact (e.g., correspondence, logs of time spent, or statements about emotional harm).
     • Industry Standards: CIFO aligns with practices similar to those of the UK’s Financial Ombudsman Service (FOS), which uses these terms without rigid definitions and assesses them based on fairness and reasonableness.
     • Ombudsman Discretion: The ombudsman determines whether distress or inconvenience is “material” by considering factors like duration, severity, and the complainant’s vulnerability (e.g., elderly or disabled individuals may face greater impact).
   • For example, in CIFO’s case studies or ombudsman decisions, compensation for material distress or inconvenience might be awarded when:
     • A bank’s error causes prolonged access issues to funds, leading to stress or disrupted plans.
     • An insurance provider’s delay in processing a claim forces a complainant to spend excessive time and effort resolving the issue

I have added more detailed commentary to the above points below.

WHAT DOES THE JFSC SAY ABOUT MAKING A COMPLAINT ABOUT A FINANCIAL SERVICES BUSINESS

• If you are unhappy with the service you received from a financial services business, you have every right to complain.
• Financial services businesses need to know when their customers are unhappy so they can get better at what they do.
• The JFSC says
  • https://www.jerseyfsc.org/protecting-the-public/making-a-complaint-against-a-regulated-financial-services-business/
• It is not part of our role to deal with complaints for individual customers of financial services businesses.
• Only the Channel Islands Financial Ombudsman (CIFO) or the law courts decide whether you should be compensated by the business you are complaining about.

THE JFSC ALIGNS ITS COMPLAINT CATEGORIES WITH THE CHANNEL ISLANDS FINANCIAL OMBUDSMAN (CIFO)

1. The JFSC SAYS in its additional supervisory risk data consultation paper No. 9 2023, it proposed adding a conduct-related question asking for the number of complaints recorded in the period, in the following categories (also see image below, appendix A):
   1. Poor administration, including customer service
   2. Customer due diligence process
   3. Fees/charges
   4. Mis-selling/unsuitable advice
   5. withdrawal/refusal of services
   6. Fraud
   7. On payment of a claim
   8. Transaction error
2. The JFSC SAYS
   1. These categories mirror those used by the Channel Islands Financial Ombudsman (CIFO) and would allow the JFSC to analyse the volume of complaints received by industry versus the number referred to CIFO.
   2. Categorising complaints is also helpful for reporting entities to identify patterns of complaints, as required by the Codes of Practice.
3. In the JFSC feedback paper on consultation paper no. 9, 2023, the JFSC say
   1. They delayed the introduction of this question and recommended that reporting entities introduce categorisation.

https://www.jerseyfsc.org/industry/consultations/feedback-paper-on-consultation-paper-no-9-2023/

2. And intend to include this question in the 2024 SRDC exercise.
3. For the first year of reporting, the data may be provided on a best-efforts basis until these categories are fully embedded into reporting entities’ complaint procedures.
4. The questions are in TAB F, the global footprint of registered persons and do not include schedule 2 businesses

CIFO AND ELIGIBLE COMPLAINTS

1. An eligible complaint as defined at Article 7 of the Financial Services Ombudsman (Jersey) Law 2014.
1. https://www.jerseylaw.je/laws/current/PDFs/L_14_2014.pdf
2. Article 7 of the Financial Services Ombudsman (Jersey) Law 2014 defines what constitutes an "ELIGIBLE COMPLAINT" and outlines the criteria a complaint must meet to be considered by the Ombudsman. Here are the key points:
1. Eligible Complainant: The complainant must be an individual or entity that falls within the categories defined by the law.
2. Relevant Financial Services Business: The complaint must relate to a financial services business regulated under the law.
3. Timing Conditions: The complaint must be made within the time limits specified by the law.

CIFO SERVICE TO WHOM

• It is a free service and settles disputes between businesses providing financial services and a sufficiently close complainant, as specified in guidance issued by the ombudsman.
  • https://www.ci-fo.org/wp-content/uploads/2016/01/151114-Guidelines-on-sufficiently-close-relationships.pdf
• As a customer.
• As a prospective customer; or
• That is sufficiently close, as specified in guidance issued by the ombudsman.
• The principal ombudsman considers that, save in exceptional circumstances, the relationship of the complainant to the relevant provider is sufficiently close and includes trust beneficiaries – it says
• 6.3 The complainant was a beneficiary, or had an actual or prospective beneficial interest, under a trust, foundation or estate of which the relevant provider was a trustee or personal representative, or the complainant attempted to enter into that relationship.

THE JFSC CODES

1. A regulated financial services business must follow the JFSC codes on complaints, and in doing so, the codes say a Complaint means
   • A Complaint is…..
     • Any oral or written expression of dissatisfaction,
     • Whether [it is] justified or not,
     • From, or on behalf of, a person
     • About the provision of, or failure to provide, a service that relates to trust company business carried on by the registered person,
     • [One] which alleges that the complainant has suffered (or may suffer) financial loss, “material” distress or “material” inconvenience.
   • This definition is the same as CIFO’s

• https://www.ci-fo.org/wp-content/uploads/2016/01/151116-CIFO-model-complaint-procedure.pdf

2. In support of the above definition

• 3.6 Complaints - 3.6.1 A registered person must establish and maintain an effective complaint handling system and procedures, and in particular must:
  • 3.6.2.1   A complaint is not satisfactorily resolved within three months of it being lodged;
  • 3.6.2.2   A pattern to complaints is identified; or
  • 3.6.2.3   Any complaint results in a claim under the registered person’s professional indemnity insurance policy.
• 3.6.1.1   Maintain adequate records of complaints against the registered person, including a central register that contains details of any agreed compensation or compromise.
• 3.6.1.2   Inform CUSTOMERS of how complaints may be made and how they may expect these to be responded to.
• 3.6.1.3   Handle complaints transparently, competently, diligently, and impartially;
• 3.6.1.4   Provide, in writing, within five business days, unless expressly agreed by the complainant to the contrary, an acknowledgement that their complaint has been received and confirm that the complaint is being considered;
• 3.6.1.5   Keep the complainant informed about the progress of their complaint, including details of any actions being taken to resolve their complaint.
• 3.6.1.6   Advise the complainant in writing when the complaint is considered closed and where the complaint is not upheld, clearly state why (s) for rejecting the complaint.
• 3.6.1.7   Comply with the requirement of 5.2.12, in relation to determining whether a complaint gives rise to any notification requirement under its professional indemnity insurance policy; and
• 3.6.1.8   Consider the complaints data for patterns emerging.
• 3.6.2 As soon as it becomes aware, a registered person must notify the JFSC promptly, in writing, if:

APPENDIX A.

THE JFSC ALIGNS ITS COMPLAINT CATEGORIES WITH THE CHANNEL ISLANDS FINANCIAL OMBUDSMAN (CIFO)

https://www.jerseyfsc.org/industry/consultations/feedback-paper-on-consultation-paper-no-9-2023/

https://www.jerseyfsc.org/industry/consultations/additional-supervisory-risk-data-consultation-paper-no-9-2023/