At the heart of the recent coverage surrounding the implementation of Mifid II in January 2018 has been concerns about stricter rules on inducements, remuneration requirements and payments for research.
But the scope of Mifid II is much greater and some advisers remain ill-prepared for the changes just three weeks away.
Big firms will be well aware that Mifid II requires them to record a wide range of telephone and electronic communications with clients, to archive and supervise them, and produce them in a timely manner upon request from the regulator. But not all financial advisers will be aware that these rules will likely apply to them in some way too.
Under the regulation businesses must retain records of all communications pertaining to a trade or transaction, including recordings of phone conversations on fixed line or mobile devices, and all electronic communications, including email, social media, instant messaging, text/SMS
messaging and so on.
The recording requirement also applies to internal communications as well as external ones, and to a company’s own account dealing as well as its client-related activities.
What counts as a ‘communication’?
For some IFAs an “analogous” written note of a call where they are intending to execute an order or deal on an account is acceptable instead of a tape of that call. But an increasing number of firms and individuals are choosing to anticipate any future regulatory developments, and avoid any future ‘he-said- she-said’ allegations further down the line.
And if you are going to capture your digital communications, whether because your business falls under the regulations, or you have decided to voluntarily comply, then make sure you know what comes under the umbrella of ‘communication’.
But that’s no simple task – many financial advisers have been compelled to exploit the many and fast-changing means of communication now available to engage with their customers, in order to meet commercial imperatives.
It’s almost 2018 and desk phones are becoming a thing of the past, even in highly regulated environments. Gone are the days when an IFA would call a client on their home landline to discuss their portfolio.
In 2017, it may be that, instead of seeing your client face-to-face, or speaking on the phone, you hear from your client via text message or LinkedIn - just a few of the many apps or channels where financial conversations might take place. But everything that’s said about your client’s accounts or transactions, whether it’s digital or verbal, will fall under the regulations.
Maintaining your records
Once you have implemented recording, however, the next step for many will be ensuring that communications records are safely stored for the mandatory record retention period. Under the original Mifid II requirement, the minimum retention period is five years, but national authorities
can extend this up to seven.
