The implementation of MiFID II is approaching quickly, so it’s important that you know who is affected and how to make sure your business is compliant.
The Markets in Financial Instruments Directive (MiFID) regulates firms who provide services linked to ‘financial instruments’. This includes IFAs, mortgage brokers, credit institutions, corporate finance companies, investment firms and brokers/dealers.
MiFID has been applicable in the UK since 2007, but is now being revised to strengthen investor protection. The 3rd January 2018 will see MiFID II set in. The following must be recorded by financial service companies if they relate to an actual or possible transaction:
- Telephone calls
- Electronic communications
- Face-to-face meetings
Records for these must be kept for 5 years (in some cases 7 years) or for the duration of the client relationship.
Commodities companies that were originally left outside the first MiFID will now be covered. This also applies to insurance brokers who take cover products with an ‘investment element’.
Customers who are affected by MiFID II may need to upgrade their telecoms systems to support recording of fixed and mobile calls. Affected firms have a number of options, depending on their existing set-up:
Landlines – no system
You can now record phone calls via cloud-based providers. If firms choose this option, they may need to consider switching to an FCA-compliant VoIP provider, as it is the most cost-effective choice.
Phone system with landlines or SIP
- Firms can add an on-premise call recorder. Some SIP providers offer cloud recording. But, firms would need to make sure that it’s FCA compliant and check storage costs.
VoIP/Skype for business
- Firms will have to ask their supplier for written confirmation from their legal/operational teams that the call recordings are FCA-compliant.
- Many VoIP providers only use Wav files and don’t offer FCA-compliant recordings. Firms will need to find out how long calls are stored for and the costs.
Mobiles are slightly more difficult. This is especially the case if the firm’s employees use SMS. There are still a number of options available.
- Firms can ban mobiles. It’s a simple solution but it reduces productivity.
- Mobile clients could be added. All recordings would be in one place, but SMS would not be recorded.
- Firms could switch to recordable sims. This would allow the recording of calls and SMS. However, it would mean being out of contract on their current mobiles.
Financial services firms will have to make sure they assess how they are affected by MiFID II. This will also need to examine how they can comply with new regulations. But, suppliers will have to make sure they are meeting the new needs of affected customers.