ASIC today released updated regulatory guidance to help improve avenues for making complaints from 1 January 2012.

The updated guidance outlines what businesses which provide traditional trustee company services (traditional services businesses) must do to have a compliant dispute resolution system, so customers and beneficiaries can access internal dispute resolution (IDR) and external dispute resolution (EDR) complaints avenues.

In addition to court, customers and beneficiaries will be able to complain directly to their traditional services business using IDR procedures, or to the ASIC-approved EDR scheme to which the business belongs (e.g. the Financial Ombudsman Service Limited).

The updated regulatory guidance applies to the 28 businesses listed at Schedule 8AA of the Corporations Regulations 2001 which must meet the dispute resolution requirements (unless they operate under transitional arrangements and consolidate their traditional services business with an existing licensee’s business before 1 January 2012).

The updated regulatory guidance follows ASIC’s consultation in Consultation Paper 138 Dispute resolution requirements for trustee companies providing traditional services (CP 138) which sets out ASIC’s proposals for updating the existing dispute resolution requirements in:

• Regulatory Guide 165 Licensing: internal and external dispute resolution (RG 165); and
• Regulatory Guide 139 Approval and oversight of external dispute resolution schemes (RG 139).

The key changes made to RG 165 and RG 139 reflect the unique nature of traditional services complaints – especially complaints involving more than one beneficiary under a will, estate, trust (not including a charitable trust) or common fund managed by a traditional services business (multiple beneficiary complaints).

Background - features of the dispute resolution process

For traditional services businesses:

From 1 January 2012, traditional services businesses must handle all types of traditional services complaints within a maximum 90 days at IDR and give either a ‘final response’ or inform the complainant of the reasons for the delay and the right to complain to an EDR scheme (including the relevant scheme’s contact details).

This longer timeframe at IDR will enable traditional services businesses to identify and contact other beneficiaries who may have an interest in the outcome of the complaint at IDR, and consider their views, so the complaint may be fairly and efficiently handled at IDR.

Updated RG 165 also clarifies how IDR interacts with certain court processes, including when time under the 90 days stops running and continues to start running again.

For EDR schemes handling traditional services complaints:

From 1 January 2012, EDR schemes must handle traditional services complaints by:

• accepting the complaint if it is within the compensation cap limit that will apply from 1 January 2012 under RG 139 (i.e. handle the complaint if the value of the claim is $500,000 or less, and award compensation up to $280,000). Where multiple beneficiary complaints are involved, whether the complaint is within the scheme’s jurisdiction should be determined by the complaining beneficiary’s claim; and
• so the scheme determination may be binding for multiple beneficiary complaints, the scheme may handle the complaint if all beneficiaries first agree to waiver and deed of release at the beginning of the EDR process. For waiver and deed of release to be effective, schemes must give each beneficiary an opportunity to obtain independent legal advice. The schemes may also discontinue handling the complaint if, in their view, it appears that a court would be the more appropriate forum.

We anticipate that schemes like FOS will need to consult with industry, consumer representatives and other interested stakeholders on its proposed Terms of Reference for the handling of traditional services complaints.

We also expect industry to start taking steps to prepare for the start of the dispute resolution requirements on 1 January 2012.

For more information see:

• Regulatory Guide 165 Licensing: internal and external dispute resolution (RG 165)
• Regulatory Guide 139 Approval and oversight of external dispute resolution schemes (RG 139)
• Feedback report 236 Response to submissions on CP 138 Dispute resolution requirements and traditional services (REP 236)
• ASIC Class Order [CO 11/261]