The FSO: To Hear or Not to Hear


Author: Andy Lenny and Conor McClements

A recent decision of the Financial Services Ombudsman (“the FSO”) highlights the circumstances in which the FSO may exercise its discretion not to investigate a complaint against a financial service provider on the basis that the courts are an “alternative and satisfactory” forum to hear the complaint.

The complaint concerned an investor (“the Complainant”) who alleged that a Bank (represented by Arthur Cox) had mis-sold him an investment.  He invested in excess of €1 million through the Bank, as placing agent, to buy shares in one foreign company.  Returns were to be generated from a commercial investment property held by a subsidiary in another jurisdiction.

The Complainant sought a full refund of the total amount of his investment, claiming mis-selling through misrepresentation, concealment, breach of duty and negligence on the part of the Bank, which he alleged had provided him with financial advice on the investment.

The Bank made a number of objections to the FSO investigating the complaint, including that (i) the complaint was statute barred; (ii) the complaint was made more than three years after the Bank had issued its final response letter (and not within the prescribed 15 days); and (iii) the Complainant was not an “eligible consumer” within the meaning of the Central Bank Act 1942, as amended (“the 1942 Act”), but rather was a sophisticated investor.

Ultimately, however, no findings were made in respect of any of these issues as the FSO determined that it had no jurisdiction to hear the complaint.

In reaching this decision, the FSO noted that pursuant to section 57BX(2) of the 1942 Act, as inserted by the Central Bank and Financial Services Authority  of Ireland Act 2004, it has sole responsibility for deciding whether a complaint falls within its jurisdiction.  Having considered the nature of the dispute and the allegations made against the Bank, the potential necessity for witnesses as to fact and expert witnesses and the remedies sought, the FSO concluded that it did not have the appropriate powers or tools to hear the complaint and that the complaint would be more appropriately determined by a court of law.

The FSO identified the following issues as effectively putting the complaint beyond its remit and competence:-

(i) The Complexity of the Case

Given the “sophisticated and complex” investment structure, the FSO would have had to make determinations in respect of the nature, structure and technical aspects of the property development the subject of the investment.  This could not have been done without forensic and legal analysis, cross-examination, expert evidence and discovery, which was stated to be “beyond the remit of the Bureau.”

(ii) Involvement of Third Parties

It was likely that evidence from witnesses as to fact and expert witnesses would have been required.  The FSO noted that it was possible that one or more third parties might have a liability in respect of the information provided to investors and that issues of indemnification could arise.  This could have given rise to difficulties in circumstances where the FSO is prohibited from investigating “non-regulated” entities and has no power to compel third parties to engage with an investigation or to produce evidence, irrespective of how critical that evidence is.

(iii) Remedies Sought

The maximum amount which the FSO may award is €250,000 (although it may also direct repayment of an investment where appropriate).  The Complainant sought redress of in excess of €1.1m, together with court style remedies.  The FSO noted that it was clear from the decision of the High Court in Walsh & Ors v The Financial Services Ombudsman [2012] IEHC 258 that the FSO is not the correct forum for a party who is seeking court style remedies.

(iv) Alleged Breach of Duty

The issue of whether the Bank owed the Complainant fiduciary duties is a question of law, as is any assessment of the extent of such duties and the potential for contributory negligence or third party liability.  The FSO considered such determinations to fall squarely within a court’s jurisdiction.


Where the FSO concludes that the full range of the rules and procedures of court may be required to determine a dispute, including cross-examination, third party procedure, indemnification, discovery and the issuing of subpoenas for witnesses, it will decline jurisdiction to investigate the complaint, recognising the limitations of its powers and competence.

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