The ombudsman began developing its Significant Event Response Plan after the 2010-2011 Queensland floods and February 2011’s Tropical Cyclone Yasi.
However, the plan is not only designed to help the FOS cope with natural disasters. The plan can also be triggered when a financial institution enters administration, liquidation or receivership; if there is a major IT failure at a financial institution; or if a “large adverse event” in financial markets occurs.
FOS general manager of general resolution, Michael Ridgway, told InvestorDaily that his organisation previously took a more “decentralised” approach to significant events, with “different people doing different things”.
The service now has a centralised plan that allows it to “respond more quickly and more effectively” to significant events, he said.
The ombudsman also has a criteria test with a “low threshold” that determines whether the response plan is triggered, Mr Ridgway added.
Once the criteria are met, a Significant Event Working Group is convened to coordinate data gathering and “engagement” with stakeholders and consumers. While Mr Ridgway was reluctant to discuss disputes related to the collapse of Australian Financial Services Group, he pointed to the insolvency of Banksia Securities as a recent event that had triggered the response plan.
Over the past 12 months, the plan was also triggered as a result of Cyclone Oswald and the bushfires in Tasmania and NSW. These response plans were unwound in late June, along with the Banksia response, Mr Ridgway said.
The FOS response plan was reactivated last week after Victorian lender Gippsland Secured Investments (GSI) froze its $150 million debenture fund, which has affected more than 3,000 investors.
GSI suspended redemptions of ‘at call’ and fixed-term debenture notes on 19 July.
“When we became aware of that suspension we activated the plan, and we’re in the early stages of collecting information, sharing any relevant information and monitoring how that situation develops,” said Mr Ridgway.
The ombudsman also has a page on its website dedicated to the developing situation at GSI.
In the case of a financial services institution entering administration, the FOS will contact the administrator, the Australian Securities and Investments Commission (ASIC) and the relevant professional indemnity (PI) insurer(s), said Mr Ridgway.
“We would let [the administrator] know whether we have any active disputes with the financial services provider, or whether we thought there was potential for disputes to be lodged,” he said.
The service also conducts talks with the administrator about the level of PI insurance and what it does – and does not – cover, said Mr Ridgway.
“We’d also check whether it was likely to be a deed of company arrangement situation, or whether it was looking more likely that the company would be going into liquidation,” he said, adding that the FOS would speak to ASIC to get their “regulatory perspective” as well.
The FOS and ASIC meet quarterly to discuss issues within the financial services industry, Mr Ridgway said.
