MiFID II - Are you ready?

November 07th, 2017 3:17pm | Call RecordingFCAMiFIDMiFID II

The Markets in Financial Instruments Directive (MiFID) was first implemented in 2007 to enable firms to operate throughout European Union (EU) and encourage competition. It also introduced investor protection measures to deter poor practice and boost client confidence. Since 2009, firms have been required to record telephone conversations and keep copies of electronic communication. In 2011, this requirement was extended to include mobile devices.

What is MiFIDII?

MiFIDII will apply from 3rd January 2018, accommodates advances in trading and technology, and strengthens investor protection. The scope has been extended to protect retail investors and demands that all communication associated with a transaction is recorded and stored for at least 5 years.

These changes affect dealing, broking, asset management and financial advisory services provided by banks and other service providers. Previously exempt financial advisers and brokers not operating across borders and not holding client funds may find their exemption has been tightened. The scope may also extend to more support organisations providing back office services.

See https://www.fca.org.uk/markets/mifid-ii for more information.

Summary of recording requirements

Firms affected by MiFIDII must record receipt of client orders, transmission of orders and the conclusion of a transaction, both when executing orders on behalf of clients and on conclusion of a transaction when dealing own accounts. Any modifications or cancellations should also be recorded.

  • New and existing clients must be notified that telephone conversations are recorded.
  • Records must be made available to the client on request for a period of five years, and by the authority for a period of up to seven years.
  • All reasonable steps must be taken to prevent an employee or contractor from sending or receiving relevant conversations and electronic communication on privately owned devices.
  • Orders placed through other channels must be made in a durable medium such as mail, fax or email. Face-to-face conversation with a client must be recorded by taking minutes or notes.
  • Records should be stored in a durable medium that does not allow the original record to be changed, deleted or copied. The retention period begins on the date that the record was created.

Choosing recording technology

Whilst many firms have been using call recording for years, compliance managers should consider whether their existing technology and business processes support the higher level of investor protection demanded by MiFIDII.

5 questions to ask ……

  1. Can both internal and external communication be recorded?
  2. Is information stored in a secure, tamper proof environment?
  3. Are we able to identify compliance breaches?
  4. Can communication records be stored for up to 7 years?
  5. Can recordings be found and recovered in the event of a complaint?

How can Oak Innovation help?

Provide an audit trail of financial advice and investment

Under Financial Conduct Authority (FCA) regulations, calls that conclude a financial agreement on investments traded on a prescribed market with any client or regulated firm must be recorded. From January 2018 when MIFID II kicks in, this will extend to anyone in the ‘advice chain’ that could lead to a trade, including financial advisors.

Secure recordings

All calls recorded on an Oak system are encrypted so they cannot be tampered with. In this way your business is better protected from abuse within the company and in case of customer disagreements. Stereo playback enables each part of the conversation to be listened to for perfect clarity as required by legal firms.

Store recordings for as long as you need

Under MiFID II, calls must now be stored for up to 7 years. Oak systems can store huge volumes of recordings and keep them readily available for searching and processing.