7.3.7 Consumer protection
FSMA established the Financial Services Compensation Scheme (Part 15) and the Ombudsman Scheme (Part 16), in order to give customers of authorised financial services firms some rights of complaint and compensation if a firm is unable to settle a claim against it. The Financial Services Compensation Scheme (FSCS) protects the deposits of customers of authorised banks, building societies and credit unions in the event of their insolvency. The FSCS also applies to authorised financial services firms engaged in regulated activities such as insurance, investment and mortgages. It does not apply to any activities of a society.
The Financial Ombudsman Service, set up under the Ombudsman Scheme, helps to settle disputes between consumers and authorised financial services firms. Most cases are settled informally. If an Ombudsman makes a final decision that is accepted by the consumer, it is binding on both parties and enforceable in court. A consumer purchasing community shares has no right to use the service to resolve a dispute regarding community shares.
Section 4.2 recommends that all share offer documents should make it clear “that anyone buying community shares could lose some or all of the money they invest, without the protection of the government’s Financial Services Compensation Scheme, and without recourse to the Financial Ombudsman Service. This warning should be prominently positioned in all offer documents and expressed in plain English. “
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