Complaint Handling Unit Exemption Guidelines

Complaint Handling Unit Exemption Guidelines FINANCIAL SERVICES AUTHORITY Bois De Rose Avenue P.O. Box 991 Victoria Mahé République of Seychelles Tel: +248 4380800 Fax: +248 4380888 Website: www.fsaseychelles.sc Email: enquries@fsaseychelles.sc Version: 16th July 2025

2 Table of Contents

1. INTRODUCTION.............................................................................................................................3
2. LEGAL BASIS ..................................................................................................................................3
3. SCOPE AND APPLICABILITY ...........................................................................................................3
4. CRITERIA FOR EXEMPTION............................................................................................................3
5. CONDITIONS FOR EXEMPTION......................................................................................................5
6. APPLICATION PROCESS..................................................................................................................5
7. REVIEW AND DETERMINATION.....................................................................................................6

3

1. INTRODUCTION 1.1 These guidelines are issued by the Financial Services Authority (“FSA”) pursuant to Sec�on 35(6) of the Financial Consumer Protec�on Act, 2022 (“the Act”) and Regula�on 3(3) of the Financial Consumer Protec�on (Complaint Handling) Regula�ons, 2024 (“the Regula�ons”). 1.2 The purpose of these guidelines is to assist financial services providers (“FSPs”) in understanding the condi�ons and criteria under which an exemp�on from establishing a Complaint Handling Unit may be granted by the Authority. 1.3 These guidelines do not override or replace any legisla�ve provisions but are intended to supplement the provisions of the Act and the Regula�ons by providing prac�cal guidance on exemp�on applica�ons.
2. LEGAL BASIS 2.1 Sec�on 35(6) of the Act provides that “The Competent Authori�es may exempt a financial services provider from establishing a Complaint Handling Unit considering the size of the financial services provider or any other relevant condi�ons.” 2.2 Regula�on 3(3) of the Complaint Handling Regula�ons allows FSPs to seek exemp�on from the requirement to establish a Complaint Handling Unit, subject to mee�ng criteria set by the Competent Authority. 2.3 Notwithstanding the exemp�on from establishing a Complaint Handling Unit, all FSPs remain obligated to establish and maintain a complaint handling procedure as per Sec�on 35(7) of the Act.
3. SCOPE AND APPLICABILITY 3.1 These guidelines apply to all licensed financial services providers seeking exemp�on from the requirement to establish a Complaint Handling Unit under the Act and the Regula�ons. 3.2 Exemp�ons may only be granted in rela�on to the establishment of a Complaint Handling Unit and not from the overall obliga�on to handle complaints effec�vely.
4. CRITERIA FOR EXEMPTION 4.1 Exemp�ons may be considered where the applicant demonstrates three or more of the following: (a) The FSP has fewer than 10 employees; (b) The nature and structure of the business is limited;

4 (i) Nature of the business refers to – • the type of financial services being offered, with due considera�on being whether the product is a simple or complex product which is less likely to generate disputes and complaints. • the clientele being served, that is whether it includes ins�tu�onal, corporate, or retail clients with the later dealing with a broad consumer base which generally requires a dedicated complaint handling unit. (ii) Structure of the business refers to – • the structure of the financial services provider who operates on a one- �me model or mul�ple transac�onal models, with the former facing lower grievance frequency than the later. • Where the exis�ng internal mechanisms are deemed effec�ve and propor�onal and se�ng up a dedicated complaints handling unit may not be required. (c) The FSP offers a narrow range of simple products or services; Simple product Complex product • Transparent, • Limited variables, • Low financial risk, • Uniform documenta�on, and easy to understand, • Short term and low reward • Condi�onal features, • Linked risks (market, credit, liquidity, AML/CFT risk), • Long tenures and high rewarding, • Vola�le • In need of detailed disclosures/specialized understanding. (d) The economic significance or systemic risk posed by the FSP is minimal; In determining economic significance, due considera�on must be made to the providers’ contribu�on in the financial system, market share, client base, and capital base. Indicators of Low Economic Significance (Favorable for Exemp�on): (i) Small Asset Base, (ii) Limited Market Share (The provider holds a negligible share of its segment) (iii) Narrow Geographic Reach (operates mostly territorially)

5 (iv) Low Revenue and Profitability (generates modest turnover, o�en below audit or regulatory materiality limits) (v) Niche Cliente (serves a narrow market segment) (vi) Minimal Employment Footprint (employs few staff and has no branch network or limited digital infrastructure). Systemic risk refers to the poten�al for an FSP’s failure or distress to disrupt the stability of the financial system or undermine public confidence in financial markets. Indicators of Low Systemic Risk (Favorable for Exemp�on): (vii) Limited Interconnectedness (Minimal exposure to or from other licensees within the non-banking sector). (viii) Simple Capital Structure Capital is funded internally or through private equity and no complex instruments like subordinated debt or hybrid capital. 5. CONDITIONS FOR EXEMPTION 5.1 The Authority may grant an exemp�on subject to the following minimum condi�ons: (a) The FSP must appoint a designated staff member (e.g., a compliance officer) to be responsible for complaints handling. (b) The FSP must have documented complaints procedures that are accessible to clients. (c) The complaints func�on must be governed by an internal structure that includes policies, procedures, record-keeping and repor�ng mechanisms. (d) The FSP must collect and analyze complaints-related data for internal reviews and iden�fy business conduct risks. (e) The FSP must demonstrate full compliance with all other complaint-handling obliga�ons under the law. 5.2 The exemp�on does not absolve the FSP from its responsibility to cooperate with the Authority or to provide complaints-related data when requested. The Authority may request periodic complaints-related data from exempted FSPs to inform market conduct supervision and regulatory policy development. 6. APPLICATION PROCESS

6 6.1 FSPs must submit a formal applica�on to the Authority using the Exemp�on Applica�on Form. 6.2 The applica�on must be accompanied by the following: (a) Reasons for seeking the exemp�on; (b) Descrip�on of internal arrangements for complaints handling; (c) Number of employees and the organiza�on chart; (d) Descrip�on of products and services offered (risk profile of the different products or services; (e) Any other suppor�ng documenta�on deemed relevant (Updated complaint register for the past two years. 6.3 The Authority reserves the right to request further informa�on or reject incomplete applica�ons. 7. REVIEW AND DETERMINATION 7.1 The Authority shall assess each applica�on on a case-by-case basis, taking into account the FSP’s structure, size, product complexity, risk profile, and internal capacity to manage complaints effec�vely. 7.2 The Authority retains the right to review, amend or revoke an exemp�on at any �me if: (a) There is a material change in the FSP’s size, operations, or risk profile; (b) The FSP fails to comply with the conditions of the exemption or with any applicable legal obligations; (c) The Authority determines that continued exemption may compromise consumer protection or regulatory objectives. 7.3 In the event of a revoca�on, the FSP will be no�fied in wri�ng, with reasons provided, and may be required to establish a Complaint Handling Unit within a specified period. 7.4 Failure to comply with the Authority’s direc�ve following revoca�on of an exemp�on may lead to regulatory sanc�ons or other enforcement ac�ons as provided under the Financial Consumer Protec�on Act and relevant licensing condi�ons.