Have the MiFID II call recording goalposts moved?

By Miles Reucroft
05-Apr-2017 14:38:58

The Financial Conduct Authority (FCA) recently released an update to its interpretation of MiFID II ahead of full implementation on 3 January 2018. In the financial advice space, the area that has caused most discussion surrounded the requirement to record all client conversations.

Notes MiFID II.jpg

This mandate has been rolled back, but only slightly. Section 18.7 on page 75 – available here – outlines the revised rules:

Based on the responses received and following extensive industry engagement, we have concluded that additional flexibility for all Article 3 Retail Financial Advisers (RFAs) is appropriate. This is because the business model of many of these firms is such that a full taping obligation may not always be proportionate. As such, we will propose that these firms, irrespective of size, can comply with the ‘at least analogous’ requirement by either taping all relevant conversations or taking a written note of all relevant conversations. The decision to tape or take a note should be taken at the level of the firm rather than in relation to individual relevant conversations or the relevant conversations of different advisers. This flexibility will not be available to MiFID investment firms who can be characterised as RFAs.

This hardly represents a major scaling back of the FCA’s stance on call recording. These rules will be finalised in June and the FCA does not expect many, if any, revisions to this.

For smaller firms, this could represent business as usual. All client activity should be logged centrally in some fashion and firms will be required to keep client records for at least five years. What is clear, however, is that there should be consistency in the call logging across each firm; one adviser keeping hand written notes and one adviser recording conversations within the same firm will not be sufficient; “The decision to tape or take a note should be taken at the level of the firm…”

As for the proportionality element, whilst smaller firms may not be required to tape conversations, it remains prudent for them to explore their options wherever possible. With the central ethos of the regulator’s work being consumer protection, how well will the permissible written notes for smaller firms stand up as evidence in a complaints procedure?

Aside from providing a stronger body of evidence as to client communications, recorded and logged client calls can have drastic time savings and drive efficiency within your business.

Even if you deem call recording to be not applicable to your business practice, it is an opportunity to look at your practice management and review some of your habits. Can call recording be conducted in a cost effective manner? Can call recording improve how you function?

For more information on call recording options in your business, click here.