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FCA Sees Pushback on Call Recording Requirements

October 07, 2016

Mifid II, passed last September by the Financial Conduct Authority (FCA), requires recording of any electronic communications, including conversations over the phone, that have any relation to “the reception, transmission and execution of orders, or dealing on own account.” The Markets in Financial Instruments Directive notes that recordings must be kept for a minimum of five years in the EU.

This measure was put into place as a means to protect both investors and investment advisers. Studies have shown that a large amount of disputes (generally from clients unhappy with the work their investment adviser is doing) center around the conversations during which advice is given and decisions are actually made. In the past, this was a tough situation to remedy, because no recordings of these conversations were kept, and the whole ordeal could easily turn into a “he said, she said” argument. When the FCA required firms to record all such conversations and keep those recordings for an extended period of time, their goal was to ensure protection of both sides and a means to clear up any potential disputes.

“Where those conversations take place by telephone, the existence of tapes will therefore provide a clear audit trail of the intention and understanding of the parties leading up to the conclusion of a transaction, particularly in cases when allegations of misselling arise,” the FCA said in a statement at the time of the passing of Mifid II.

Despite the obvious benefits of call recording, there has been some pushback from firms, generally the smaller ones. This is because they do not feel properly equipped to take on the cost of call recording technology and recording storing software and analytics. The FCA is reportedly open to suggestions for a solution that would continue to provide these firms with protection at a lower cost, but so far none has materialized. In the meantime, firms will have to continue to look for proficient, cost efficient call recording software. 




Edited by Stefania Viscusi

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