Regulation by the Financial Conduct Authority (FCA) requires firms and individuals in the financial services industry to record their transactions and agreements including those taken in a telephone call. The FCA regulations MiFID I and MiFID II (Markets in Financial Instruments Directive) helps protect consumers against market abuse, increase transparency, helps to prove best practice and resolve complaints. First introduced in 2007 MiFID I includes important directives;
The scope of MiFID I was increased in 2014 with the introduction of MiFID II and now covers;
MiFID II addresses the following markets;
In 2016, the FCA extended MiFID II by including IFAs (Independent Financial Advisors) in the requirement to record financial transactions, including agreements made by phone. In 2019, the FCA moved to regulate Claims Management Companies and ruled that call recordings must be made and kept for 12 months. Financial Ombudsman Service information has also shown that the majority of complaints about investments centre on the “conversations when investments are sold.” Firms must record telephone conversations and electronic communications relating to “the reception, transmission, and execution of orders, or dealing on own account.”
During the Pandemic in 2021, the FCA turned their attention to increased homeworking and concluded that it increases misconduct risks, especially with the rise of unmonitored, encrypted apps like WhatsApp. Firms must now ensure that in-scope activities on business devices using such apps are recorded and auditable to mitigate these risks or else face penalties.
In 2023, the FCA introduced the Consumer Duty, a significant initiative aimed at enhancing customer protection within financial services. This framework establishes elevated and more transparent standards, mandating firms to prioritise their customers’ needs. Comprising a central principle and accompanying rules, the Consumer Duty ensures that consumers receive clear communications, products and services tailored to their needs and fair value. Additionally, it emphasises timely and adequate customer support.
Summary of MiFID II call recording requirements:
Simple to use and easy to implement for hosted, hybrid or on site PBX phone systems.
Further information on MiFID II and FCA regulations can be found here:
2023 FCA Consumer Duty https://www.fca.org.uk/news/press-releases/fca-consumer-duty-major-shift-financial-services
2021 WhatsApp-FCA Market Watch 66 https://www.fca.org.uk/publications/newsletters/market-watch-66
2016 Advisers to record telephone calls under FCA Mifid rules https://www.moneymarketing.co.uk/fca-asks-advisers-record-telephone-calls
2016 Regulation of markets in financial instruments www.fca.org.uk/markets/mifid-ii
2016 MiFID II – Application and notification user guide www.fca.org.uk/publication/documents/mifid-ii-application-notification-guide.pdf