The Financial Ombudsman Service (FOS) operates a system to log and investigate systemic failures in companies, Chief Ombudsman Shane Tregillis says.

“As part of our Australian Securities and Investments Commission (ASIC) approval we do have an obligation in relation to the identification and follow-up of a systemic issue,” he told a Senate committee hearing into ASIC’s performance last week.

“It is not that we are undertaking proactive surveillance – we are not the regulator. But if a dispute comes in… that has some indication it may affect people beyond that individual dispute, we have a process where we escalate that to a separate, systemic issues team.”

He says FOS would make enquiries of the relevant company to identify potential systemic issues and “seek their co-operation in responding and putting in place a remedial action”.

“In most cases… we get that co-operation and most issues are dealt with in that way,” Mr Tregillis said.

Refusal to co-operate is considered misconduct.

“We would have an obligation to report that company to ASIC as a case of serious misconduct for failure to deal with a systemic issue. So we have an important role, but it is a specific one that, in my view, is an extension of our individual complaint handling.

“It does not extend into a regulatory function. It is where we say there are indicators that this complaint could affect more than one person.”

Mr Tregillis says FOS has strengthened its systemic failure team in recent years.

“We have training for all our staff around our systemic issues. We have a system where all systemic issues are logged, then escalated and reviewed. The ombudsman ultimately makes a determination about whether or not this is a systemic issue.”