MiFID II: how Welcome Telecom can help
WHAT IS MiFID II?
The Markets in Financial Instruments Directive (aka MiFID II) is due to come into force on 3 January 2018. First introduced by the EU in response to the 2008 financial crisis, MiFID was a set of sweeping reforms for the financial industry designed to prevent history from repeating itself.
MiFID II will replace the original Directive and will bring changes to many areas relating to the conduct of business, including far more robust rules around the recording and storing of conversations.
WHO DOES THIS AFFECT?
Under today’s MiFID regulations, organisations involved directly in trading must record conversations. However, as long as they don’t operate across borders or hold client money, some organisations, such as financial advisers and brokers, are exempt.
Under MiFID II, any organisation providing financial services to clients linked to “financial instruments” will have to record and store all communications intended to lead to a transaction. Even if the conversation is aimed at giving advice, if it could lead to a trade or investment it must comply with this rule.
WHAT NEEDS TO BE RECORDED?
Currently, the FCA mandates that fixed line and mobile calls must be recorded. The new regulations stipulate that all conversations “that are intended to lead to a transaction” must be recorded. MiFID II also includes other communications such as mail, fax, email or audio recording of client orders placed during face-to-face meetings that are intended to result in a trade.
HOW DO RECORDINGS NEED TO BE STORED?
Currently, recordings must be kept for six months.
Under MiFID II, recordings must be stored for a minimum of five years, and if requested for seven years. All recordings must be kept in a “durable medium” so that they can be effectively monitored for compliance, and in a way that allows them to be replayed or copied whilst ensuring that the original record cannot be altered or deleted. They must be readily accessible and available to the FCA on request, and all organisations are responsible for ensuring the quality, accuracy and completeness of records.
HOW DO RECORDINGS NEED TO BE MONITORED?
To ensure compliance, organisations will need to carry out a “risk-based and proportionate” review of their records on a periodic basis. Organisations will also need to prove that the appropriate policies, procedures and management of recording rules are in place and that management have clear oversight of these.
Companies must also periodically re-evaluate the effectiveness of their recording procedures and, if necessary, adopt alternative or additional methods. Where they are unable to comply with recording policies, they must investigate why the records were unable to be retained. Records of these investigations need to be kept for the same length of time as the original record’s retention period.
If you are a financial company and have yet to ensure your compliance with MiFID II, don’t panic. Our Horizon hosted telephony service has call recording functionality which can be easily be activated. Just get in touch and we can set this up for you.
If you currently have a phone system with another provider, you should check with them to see if they can also offer the ability to record calls.
The MiFID II deadline is fast approaching – act now to ensure your company’s compliance!