Financial Markets Ombudsman Service launched

On 17 January 2025, Bank Negara Malaysia (“BNM”) and the Securities Commission Malaysia (“SC”) announced the launch of the Financial Markets Ombudsman Service (“FMOS”).1
 
Commencing 1 January 2025, the FMOS will serve as a centralised dispute resolution centre for financial consumers and investors throughout Malaysia.
 
The FMOS is a merger between the Ombudsman for Financial Services (“OFS”) approved by BNM and the Securities Industry Dispute Resolution Centre (“SIDREC”) approved by the SC and will operate under the joint oversight by BNM and the SC.
 
The FMOS will provide independent and impartial mediation and adjudication services and will serve as an alternative dispute resolution forum to the judicial system.
 
Background
 
The FMOS was incorporated on 30 August 2004 as a company limited by guarantee under the name of Financial Mediation Bureau. It changed its name to Ombudsman for Financial Services on 20 June 2016, and assumed its present name, i.e. Financial Markets Ombudsman Service on 6 September 2024.2
 
The FMOS will operate a financial ombudsman scheme approved or provided under section 126(2) of the Financial Services Act 2013, section 138(2) of the Islamic Financial Services Act 2013, section 42A of the Development Financial Institutions Act 2002 and section 379(b) of the Capital Markets and Services Act 2007 read together with paragraph 3(1) of the Capital Markets and Services (Dispute Resolution) Regulations 2010 (“CMSDR Regulations”).
 
Dispute resolution process
 
The dispute resolution process will be governed by the Rules of the Financial Markets Ombudsman Service (“Rules”).3 Some of the salient features of the Rules are set out below.
 
Principles
 
In dealing with any dispute, the FMOS must observe the principles4 set out in Rule 2.1 of the Rules, namely: 
  • Independence;
  • Fairness and Impartiality;
  • Accessibility;
  • Accountability;
  • Transparency; and
  • Effectiveness. 
Complainant and Member
 
The disputes that may be referred to the FMOS are disputes between a complainant (“Complainant”) and a member (“Member”) in respect of financial and capital market services or products and Islamic financial services or products developed, offered or marketed by a Member, or by a Member for or on behalf of another person as set out in the Rules (“Complaint”).
 
For the purposes of the Rules: 
  • a Member refers to any of the following persons: (a) licensed banks; (b) licensed Islamic banks; (c) licensed insurers; (d) licensed takaful operators; (e) prescribed development financial institutions; (f) approved financial advisers and approved Islamic financial advisers; (g) approved insurance brokers and approved takaful brokers; (h) approved issuers of a designated payment instrument; (i) approved issuers of a designated Islamic payment instrument; (j) a corporation which is deemed to be a Member pursuant to the CMSDR Regulations; and (k) any other person in relation to whom a direction has been issued by the SC pursuant to the CMSDR Regulations; and 

  • a Complainant, subject to the RM250,000 monetary limit of a claim (“Monetary Limit”), refers to any of the following persons who is eligible to bring a Complaint against a Member for direct financial loss: (a) a financial consumer who uses or has used financial services or products provided by a Member (i) for personal, domestic or household purposes; or (ii) in connection with a small business; or (b) an individual investor or sole proprietor having a dealing or transaction relating to capital market services or products involving a Member. 
The Rules set out other considerations relating to a Complainant or Complaint. A summary of some of these considerations are as follows: 
  • clarification of the meaning of the terms “financial consumer” and “small business”; 

  • the right of a Complainant and Member to jointly agree to refer a dispute to the FMOS where the direct financial loss claimed by the Complainant exceeds the Monetary Limit; 

  • the rate of exchange applicable where the sum claimed by a Complainant is quoted in a foreign currency; 

  • the right of an estate or next of kin etc. to file or continue a Complaint after the death of eligible Complainant; 

  • the right of the guardian to file or continue a Complaint when an eligible Complainant has become medically unfit (physically or mentally); and 

  • restriction of right to pursue a Complaint either before the FMOS or the Tribunal for Consumer Claims.5
Eligible disputes
 
The FMOS has the jurisdiction to consider a dispute against a Member for direct financial loss up to the Monetary Limit. Such jurisdiction extends to a dispute filed against a Member regardless whether that financial or capital market service provider was a Member at the time of the act or omission.
 
The Rules confer discretion on the FMOS to determine: (a) whether a financial consumer qualifies as a Complainant; (b) whether a dispute constitutes one claim or more; and (c) other powers of the FMOS in determining eligibility of the Complainant and the dispute.
 
Excluded disputes
 
Rule 5 of the Rules sets out various categories of disputes that fall outside the scope of the FMOS. The excluded disputes include the following: 
  • a dispute exceeding the Monetary Limit except where the parties jointly agree in writing to submit the dispute to the FMOS; 

  • a dispute arising from commercial decisions within the discretion of the Member (e.g. product pricing or product features and applications for rescheduling of loan) except in cases of alleged non-disclosure, misrepresentation/ mis-selling by a Member in relation to the capital market product or service; 

  • a dispute that has been filed in court or referred to arbitration or has been decided by a court or arbitrator; 

  • a dispute that is referred to the FMOS after more than six months from the date on which the Complainant receives the Member’s final decision (except where an extension of time is granted by the FMOS); 

  • a dispute that has exceeded the relevant limitation period provided under the applicable statute of limitations at the time the Complaint is submitted to the FMOS; 

  • a dispute for which a final and binding decision has already been given by the FMOS (or a predecessor scheme) unless new material evidence arises that may affect the earlier decision; 

  • a dispute concerning the performance of a product (financial or capital market) or investment (except where it involves any alleged non-disclosure or misrepresentation/ mis-selling by the Member in relation to such product or capital market service); 

  • a dispute involving more than one Complainant that has been referred to the FMOS without the consent of the other Complainant, and the FMOS is of the view that it would be inappropriate to deal with the dispute without the other Complainant’s consent; 

  • a dispute involving claims arising from third-party bodily injury or death; and 

  • a dispute involving matters under investigation by BNM or the SC, as the case may be, where the relevant authority has issued a direction under the applicable regulations to the FMOS not to proceed with the dispute resolution process. 
Time limit for referral to the FMOS
 
A Complainant may file a Complaint with the FMOS after the dispute has been referred to the Member involved in the dispute for internal resolution and the Member: (a) has issued its final decision within 60 days from the date the dispute was first referred to the Member, and the Complainant does not agree with such decision; or (b) has failed to respond within 60 days from the date the dispute was first referred to it.
 
The FMOS has the discretion under Rule 6.3 to accept a dispute that falls outside the prescribed time limit if: (a) there are exceptional circumstances which warrant the FMOS to accept the Complaint; or (b) the Member does not object to the FMOS accepting the Complaint.
 
Discretion to dismiss a dispute
 
Subject to approval of a panel consisting of the chief executive officer (“CEO”) of the FMOS and two ombudsmen, the assigned case manager may refuse to consider or continue a dispute, or dismiss a dispute under Rule 7.1, if the dispute: (a) is frivolous, vexatious, lacking in substance or clearly unsustainable; or (b) relates to or has an element of fraud perpetrated by the Complainant against the Member.
 
The decision of the assigned case manager under Rule 7.1 must be made in writing and substantiated by reasons within 14 days after receiving the complete documents from both parties.
 
The Complainant may, within 14 days from the date of notice of such decision, request for a new case manager to review the decision made. The new case manager conducting the review shall decide on the request within 14 days from the date of receipt of such request subject to the approval of the panel consisting of the CEO and two ombudsmen.
 
Dispute resolution method
 
The FMOS may resolve a dispute by means of negotiation, conciliation, mediation and/or adjudication.
 
Initial vetting stage
 
The initial vetting stage comprises the following steps: 
  • a review by the assigned case manager of the dispute lodged with the FMOS; 

  • an assessment by the assigned case manager as to whether the dispute falls within the jurisdiction of the FMOS; and 

  • the payment by the Member to the FMOS of (a) RM1,500 upon registration of the dispute by the FMOS; and (b) RM5,000 within 14 days of the referral of the dispute to the ombudsman. 
A decision by the FMOS to register or reject any dispute is binding on the parties.
 
Dispute resolution process
 
The dispute resolution process under the FMOS may comprise two stages.
 
Stage 1 : Case Management
 
Once a case is registered, it will be assigned to a case manager who will assess the case.
 
The case manager may request the Complainant to provide such further information or documentation as may be required. After receiving complete information, the case manager will request the relevant Member to respond to the dispute.
 
The role of the case manager includes the following: 
  • manage the dispute assigned to him;
  • assess the eligibility of the dispute lodged with the FMOS;
  • investigate the issues raised in or relating to the dispute;
  • encourage and facilitate dialogue, provide guidance, assist the parties in clarifying their interests and in understanding differences and working towards a mutually acceptable settlement;
  • conduct conciliation, negotiation or mediation, as he deems fit; and
  • issue a recommendation (“Recommendation”) in respect of the dispute. 
Within 30 days after receiving complete information, including representations both oral and documentary, on the matter, the case manager will assess the case and may call the parties for conciliation, negotiation or mediation (Rule 11.7).
 
If the process referred to in Rule 11.7 is successful, a settlement agreement will be executed by the parties.
 
If no settlement is reached within the 30-day period referred to in Rule 11.7, the case manager will issue a written Recommendation within 30 days from the date the parties failed to reach an amicable settlement. The Recommendation shall, inter alia, include his opinion as to how the matter should be resolved.
 
If both parties accept the Recommendation, the dispute is resolved based on the Recommendation and the parties will enter into a written agreement reflecting the settlement terms. The Complainant must undertake to provide the Member with a binding release of the Member’s liability which shall be effective from the date the Member fulfils all its obligations under the settlement agreement.
 
If the matter is not settled at the case management stage, either party or both may, within 30 days from the date of the notice of Recommendation, request for the matter to be adjudicated.
 
If the Complainant does not respond to the Recommendation within 30 days from the date of the notice of Recommendation, the dispute is deemed not to have been referred to adjudication. On the other hand, if the Member does not respond to the Recommendation within the said 30-day period, the Member is deemed to have accepted the Recommendation.
 
The case manager may refer a dispute directly for adjudication without first making a Recommendation if he is of the view that it would be in the best interest of the parties to resolve the dispute urgently. The FMOS must inform the parties of this proposed course of action and must not proceed to adjudication without first giving the parties a reasonable opportunity to make further submissions and provide additional information about the dispute.
 
A Complainant may at any time during the dispute resolution process withdraw the dispute in writing and is then at liberty to pursue his rights through any other means. A Member may not withdraw from the dispute resolution process.
 
Stage 2 : Adjudication
 
Once an ombudsman is assigned to a case, which must be done within seven days from the date of receipt of a request for adjudication, the case manager will forward the case file to the ombudsman within seven days of the assignment. The case file is to include the documents mentioned in Rule 11.15 of the Rules.
 
The ombudsman will review the matter including the case manager’s Recommendation and may require the parties to supply further documents or make further submissions, and may request the parties to appear in person before him.
 
The ombudsman may provide a preliminary assessment of the dispute before it is adjudicated. If the parties resolve the dispute based on the preliminary assessment, they will enter into an agreement reflecting the terms of the settlement. The Complainant must undertake to provide the Member with a binding release of the Member’s liability which shall be effective from the date the Member fulfils all its obligations under the settlement agreement.
 
The ombudsman will adjudicate the dispute by way of hearing or on a documents-only basis (including written submissions, replies and clarifications, if any).
 
The ombudsman may concur with the Recommendation or arrive at a decision which is contrary to or differs from the Recommendation. The ombudsman must deliver his written decision which sets out the ground for his decision within 14 days from receiving the case file and/or any further documents requested (“Adjudication Decision”). The 14-day decision making period may be extended due to complexity of a case.
 
The Adjudication Decision of the ombudsman is final.
 
The ombudsman may grant the reliefs set out in Rule 11.22 of the Rules but is not permitted to grant any punitive, exemplary or aggravated damages.
 
The Complainant may accept or reject the Adjudication Decision within 30 days from the date of notice of Adjudication Decision, failing which, the Complainant is deemed to have rejected the Adjudication Decision. A Complainant who rejects or is deemed to have rejected the Adjudication Decision, is at liberty to pursue his rights through any other means. If the Complainant accepts the Adjudication Decision: 
  • the Member shall comply with the Adjudication Decision within 14 days from the date the Member is informed of the Complainant’s acceptance of the Adjudication Decision; and 

  • the Complainant must undertake to provide the Member with a binding release of the Member’s liability in respect of matters resolved by the Adjudication Decision and such release shall be effective from the date on which the Member fulfils all its obligations under the Adjudication Decision. 
Any monetary sum awarded in an Adjudication Decision may be recovered or enforced against the Member in court as a debt.
 
The FMOS may, where it deems necessary, clarify the terms of the Recommendation or the Adjudication Decision or correct any clerical, typographical or computational error or any other error of a similar nature in such decision.
 
Participation in a dispute resolution process
 
The Rules prescribe that only the Complainant and Member may appear in the dispute resolution process. However, the case manager or ombudsman may allow any other person to attend the process subject to the execution of a confidentiality agreement as prescribed by the FMOS.
 
Notwithstanding the foregoing, neither party shall be represented by legal counsel or any other person in a similar capacity during any meetings or hearings.
 
Amendment to particulars of claim in dispute filed
 
Subject to the FMOS’s approval, a Complainant may amend the particulars of a claim in a dispute by completing and filing the amendment as may be prescribed by the FMOS containing adequate details of the amendments made and reasons for such amendments.
 
Discretion to extend time
 
Nothing in the Rules shall restrict the FMOS’s ability and discretion to grant an extension of time (even if the original period, or the period as extended, has ended) to itself or to a party if the FMOS considers it appropriate to do so.
 
Confidentiality
 
Unless otherwise agreed by the parties, all matters relating to the dispute and the dispute resolution process shall be kept confidential by the parties and their representatives and witnesses, except where disclosure is necessary for implementing and enforcing the Recommendation or the Adjudication Decision or, to the extent that disclosure may be required of a party by a legal duty or to pursue a legal right or to challenge the Adjudication Decision in proceedings before a court or other judicial authority.
 
All meetings and hearings, conducted in any manner, are to be conducted in strict confidence and no recording may be made except by the FMOS (if it deemed necessary for its internal use).
 
Court or debt recovery process
 
Where a dispute referred to the FMOS relates to a debt owed to a Member, the Member must not take any action to recover the debt until the dispute resolution process under the FMOS is exhausted. Notwithstanding the foregoing, a Member may initiate a legal proceeding where the limitation period for such proceeding will expire shortly. However, the Member must apply to stay the proceeding until the FMOS’s dispute resolution process is completed.
 
A Member shall not initiate defamation proceedings of any kind against a Complainant in respect of the allegations made by the Complainant about the Member in relation to or arising from a dispute referred to the FMOS.
 
Other points of interest
 
To assist financial consumers or investors in the dispute resolution process, the FMOS has uploaded helpful documents, such as guide notes, document checklists and complaint forms applicable to different categories of Members to its website. The FMOS’s website can be accessed here.
 
Comments
 
The Rules are substantially similar to the terms of reference of the OFS. It also omits the appeal process included in the terms of reference of the SIDREC. Financial consumers and investors who seek recourse through the FMOS should familiarise themselves with the various steps of the process and the time frame within which such steps must be taken.
 
 
Article by Lee Ai Hsian (Partner) and Javene Fan (Senior Associate) of the Corporate Practice of Skrine.
 
 
 

1 The joint media release issued by BNM and the SC can be accessed here.
2 The constitution of FMOS can be accessed here.
3 The Rules can be accessed here.
4 Further details relating to each of these principles are set out in paragraphs (a) to (f) of Rule 2.1 of the Rules.
5 Refer to Rules 3.2, 3.4 and 3.5 to 3.8 for further details.

This alert contains general information only. It does not constitute legal advice nor an expression of legal opinion and should not be relied upon as such. For further information, kindly contact skrine@skrine.com.