What is an Ombudsman?

Origins of the Ombudsman

The term “Ombudsman” is an indigenous Swedish, Danish and Norwegian term, rooted in Old Norse and essentially means “representative.” A prototype of an Ombudsman may have flourished in China during the Qin Dynasty (221 BC) and in Korea during the Joseon Dynasty. The first preserved use however is in Sweden.

In fact, the Ombudsman first appeared in Sweden in 1713. At the time, Charles XII was in exile in Turkeyand was concerned about maintaining authority over his kingdom. He needed a representative in Sweden to ensure that judges and civil servants acted in accordance with the laws and with their duties. He appointed a representative or Supreme Ombudsman. If the judges and civil servant did not fulfil their duties, the Supreme Ombudsman had the right to prosecute them for negligence.

Modern variations of this term include “ombud”, “ombuds”, “ombudsperson”, or “ombudswoman”, and the conventional English plural is ombudsmen. Ombudsmen have moved from being solely appointed by the State or Parliament; involved in investigating complaints from members of the public who feel that they have been unfairly treated by Government Agencies to becoming more specialist in nature, as well as operating in the private sector including in universities and various specialist sectors, for instance banking, investments, insurance, pensions, energy and politics.

Characteristics of Financial Services Ombudsmen

Specifically, a FSO is an appointed person who acts independently and impartially to resolve disputes between Complainants and Financial Services Providers (FSPs) which may include banks, insurance companies, mutual funds, investment companies and pension funds.  The FSO is usually supported by a staff complement that varies in form from country to country. In some countries FSOs are established by law and in other countries they operate voluntarily, in the absence of legislation.

FSOs are alternative courses of redress to the Court system and at no time do they act parallel to the Court.

  • At any time during the complaints process, the Complainant is free to take his/her matter to Court.
  • Where a Complainant approaches the FSO for relief and it is determined that the dispute is of such a complex legal nature that the Court may be best suited to rule in the matter, then the FSO duly informs the Complainant that securing legal representation and taking the matter to Court is best.
  • Additionally, if a Complainant approaches the FSO and it is realised that the matter is either before the Court or another alternative dispute resolution (ADR) body, then the FSO alerts the Complainant that the FSO has no jurisdiction in the matter.
  • Lastly, if the dispute is the subject of a claim that has already been before the Court or another ADR body, then again the FSO informs the Complainant that he has no jurisdiction to act in this matter since the decision of the Court or the other ADR body would be binding. Since the FSO is operating as an alternate to the Court system, his/her decisions will also be binding. Failing to follow the Award, including a Direction of the FSO will be treated as an offence and a sanction duly leveraged.

It should be stressed that FSOs provide a more accessible, informal and speedy process as compared to the traditional court system and most of them are free to Complainants.

The processes employed by FSOs are designed to redress the imbalance of resources and expertise, which are likely to exist between the Complainant and the FSP, so that neither party needs an attorney-at-law.

FSOs resolve cases on the basis of fairness, by employing the techniques of mediation (where that is possible) or by investigating and issuing a recommendation. In addition to resolving cases and unlike the Court, they deal with enquiries.