1. Perspectives of the FOS Systemic Issue and Serious Misconduct Process
Welcome to the Panel Session relating to Systemic Issues and Serious Misconduct. I hope you all enjoyed your day yesterday, whatever sessions you chose to attend (and didn’t enjoy your night too much, otherwise you wont even be here).
This morning, following on with the conference theme of Building on Strength, I plan to build on the theme of strength of approach to dispute resolution and strength of relationships with customers and FOS by presenting a discussion about something other than the individual resolution of disputes, that of the identification, management and resolution of systemic issues and cases of serious misconduct: why we do it, why it is important, how we can help each other and some critiques and suggestions from the regulator, the industry and the academic world.
FOS Build On Strength 2011 National Conference

2. Panel
Delia Rickard, Senior Executive Leader, Consumers, Advisors and Retail Investors (and ACT Regional Commissioner), ASIC Jane Pires, Executive Manager Group Customer Relations, Suncorp Group Prof Vicki Waye, Dean of Teaching and Learning, Class Action Expert, UniSA
I am thrilled to be assisted today by a fabulous panel representing each of those perspectives, namely: Delia Rickard from ASIC, Jane Pires from the Suncorp Group and Professor Vicki Waye from the University of SA. Following our presentations, we will address some of the questions we have already received from you and encourage any further questions or comments.

3. FOS Management of Systemic Issues and Serious Misconduct
To kick things off I want to give you some of the specifics of the FOS approach to the management of Systemic Issues and Serious Misconduct.
I have concentrated on our process in an attempt to demystify it for those of you that may not have participated in the process and to provide some tips for working together through the process (where appropriate). I also want to give you some info about some of the benefits of our systemic issue investigations in the last 12 months and sources of information about the work we do in this space.
Sally Davis, FOS Systemic Issues Manager
3 June 2011

4. Introduction EDR Obligations ASIC RG 139
FOS Terms of Reference Definitions
Systemic Issue Management Process
Some Outcomes of Systemic Issue Management
Simplistically, this presentation is intended to be the ‘what’, ‘why’ and ’how’ of the work we do at FOS in relation to systemic issues and cases of serious misconduct. This will include:
A brief explanation of our obligations as an EDR scheme. The ‘why’ of the systemic issue space. I will keep this brief as it will be dealt with more appropriately by Delia for ASIC;
An explanation of the relevant FOS Terms of Reference definitions in this space – the ‘what’ of the systemic issue space;
A quick walkthrough of the SIM process at FOS – the ‘how’ of the systemic issue space; and
What we aim to achieve in undertaking a systemic issue investigation through highlighting some of the resulting benefits to the consumer, the FSP’s business and generally to improve industry practice and communication. .

5. EDR Obligations EDR Service Requirement to meet ASIC RG 139 guidelines
Obligations extend to Systemic Issues and Cases of Serious Misconduct
FOS is, of course, first and foremost, an external dispute resolution service with a core business of managing individual disputes.
In order to retain our approved status as an EDR scheme we must comply with the requirements of ASIC Policy Statement 139.
Among other things, PS139 requires FOS as an approved EDR scheme to manage systemic issues and report cases of serious misconduct to ASIC.
I will let Delia expand further on this obligation.

6. Definitions
Of course, the whole discussion is meaningless without an understanding of what a systemic issue or a case of serious misconduct actually is. This terminology means different things to different people and is commonly used across many different industry sectors.
An internet image search of the words systemic issues depicts images from world financial affairs through to water rights and religious sites...just to name a few...they all obviously mean different things to different people working in those sectors. This disturbing one in particular caught my eye as relating to ‘systemic symptoms for yeast bladder infections’ – the medical industry is also well represented – so we’re not the only ones that grapple with systemic issues.

7. Terms of Reference Definitions
“Systemic Issue” (11.2)
“...an issue that will have an effect on other persons...beyond the parties to the dispute”
“Serious Misconduct” (11.3)
“...conduct which may be fraudulent, grossly negligent or involve wilful breaches of applicable laws or obligations under these Terms of Reference”
So it is therefore important that we are specific about how these terms are defined by FOS…because…
Read out definitions.
Notably, the definitions are not restricted, for example, by the number of customers that might potentially be affected or by the quantam of their loss.
* Work in some examples*

8. ASIC RG 139 Identify Refer Report
In accordance with ASIC PS 139, we have an obligation to: (animation) identify, refer and report on systemic issues and cases of serious misconduct.
It is the aim of the FOS systemic issue management process to meet these obligations.
In order for FOS to meet its ASIC obligations in regard to systemic issues and serious misconduct we have developed a consistent process for the management of these issues. Even though the process applies to all member FSPs, each systemic issue and case of serious misconduct is treated individually on a case by case basis.

9. FOS Systemic Issue Management Process
Initial Identification of Possible Systemic Issues
Identification Assessment
Notification and Consultation with the FSP
Determination of Systemic Issue Status
Resolution of Systemic Issue – Agreed Outcomes
De-Identified Report to ASIC
Initial Identification...
As potential systemic issues primarily arise from the issues raised by disputes and as, despite the appearance of superhuman abilities, the SI team is unable to review every single dispute that is lodged at FOS, identification of potential systemic issues is conducted by dispute resolution staff at FOS primarily utilising a checklist designed for this purpose.
Identification Assessment
The checklist primarily assists FOS staff to recognise whether the issues raised by the dispute may have affected customers other than the parties to the dispute. If the answer is yes to any of the questions raised in the checklist, the staff member is instructed to refer the matter to the systemic issues team for review and, in most cases, the resolution of the original dispute will continue independently of the systemic issue investigation.
Notification and Consultation & Determination of SI Status [CLICK BOTH]
Where the SI team assesses that the matter appears to be potentially systemic, the team will write to the FSP to investigate the issues raised. Following the referral to the FSP, the team – in consultation with the relevant Ombudsman – will assess whether the issue raised is either definitely systemic or not systemic (rejected). [pause] The SI investigation is conducted solely between FOS and the FSP and will not involve the dispute applicant. Nor will it involve ASIC unless the FSP has refused to participate in the SI process or ASIC has exercised its legislative right to compel such information.
Resolution of Systemic Issue – Agreed Outcomes
Once a DSI is confirmed, the SI team, in collaboration with the FSP will work together to take steps to resolve the SI and determine Agreed Outcomes. I will speak more about Agreed Outcomes in a moment.
De-Identified Report to ASIC
In compliance with the third limb of our RG139 obligations, FOS must report any SIs or cases of serious misconduct to ASIC.FOS provides such a report on a quarterly basis containing a comprehensive de-identified summary of all Sis identified, investigated and resolved during the quarter. Cases of serious misconduct are reported on an identifiable basis.
*NEED TO METION CONCURRENT INVESTIGATIONS*

10. Agreed Outcomes Purpose of Outcomes ‘Agreed Outcomes’
An Agreed Outcome [CLICK]for the resolution of a SI could be one or all of the following:
Identification of all affected customers by the member;
A timetable of action to ensure that all identified affected customers are reimbursed with any agreed financial loss, if any;
Action to ensure that the problem causing the DSI has been rectified moving into the future; and
Where appropriate, an undertaking from the member hat any future affected customers will be reimbursed for their loss in the same way as the identified customer group.

11. Some Positive Outcomes
‘36,544 Affected Customers’
‘$17.5m Reimbursements Paid’
Aside from the obligation to deal with SIs FOS recognises the benefits that can flow from SI identification and resolution. In our 2010 Annual Review we reported that we had identified 71 possible systemic issues in that financial year, 58 of which had been found to be systemic and were resolved to the satisfaction of the relevant Ombudsman. For some of these issues, the FSP was able to tell FOS how many customers were affected by the issue and how much money was paid to the affected customers. In total for the 58 cases, [CLICK] 36,544 customers (that we know of) were affected and over [CLICK] $17.5m in reimbursements were paid.

12. In Conclusion
So, even though, FOS as an approved EDR scheme has developed this process in order to manage its obligation to report systemic, persistent or deliberate conduct to ASIC – by dealing effectively with SI and serious misconduct, FOS can assist in raising industry standards and help customers of our member FSPs obtain fair compensation for financial loss, even when they have not complained to FOS.
I hope that I have gone some way to demystifying FOS’s approach to the management of SI and serious misconduct and am now thrilled to introduce this esteemed panel to provide some information and feedback about systemic issues from other perspectives.
First, let me say it is great to have the regulator at the table to explain in a little more detail why we do what we do in this space and to do that I invite Delia Rickard to take the microphone. [Delia’s Bio]
Thank you Delia
So now you now why we do what we do, and to give you an industry perspective of the management of systemic issues “from the inside”, we are privileged to have with us Jane Pires from the Suncorp Group [Jane’s Bio]
Thank you Jane
I was approached over six months ago by our next charming panel member. She explained to me that she was conducting a research project to investigate the transaction costs associated with the investigation and resolution of systemic issues by FOS as compared to the transaction costs that accompany class action litigation. I have to admit, I was intrigued! Prof Waye’s paper is not yet complete but I nevertheless invited her to give us some further insight into this fascinating perspective on ‘collective redress’. [Vicki’s Bio]