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Advisers could be forced to record client calls

by: Laura Miller
  • 26/03/2015
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The Financial Conduct Authority (FCA) could force all financial advisers to record client telephone calls to prove they are acting in clients' best interests, in line with Europe-wide rules.

Firms would also need to take “all reasonable steps” to record face-to-face meetings and electronic communications relating to actual or proposed client transactions.

Currently some retail financial advisers are exempt from the recording rules laid out in MiFID II – the Markets in Financial Instruments Directive II.

But the FCA is proposing to extend the rules to these exempt ‘Article 3′ firms.
MiFID II specifies the need to record certain telephone conversations and electronic communications.

These include transactions done when dealing on own account and the provision of client order services that relate to receiving, transmitting and executing client orders, but also those conversations that are intended to result in a transaction.

From a consumer protection perspective, introducing such standards across all firms, may improve their behaviours when conducting business, the FCA said.

“It will also enable us to assess firms’ compliance with the conduct of business requirements, pursue enforcement cases for market abuse and support claims of non-compliance with our regulatory requirements,” the regulator said.

“All of these factors may act as a deterrent for firms that fail to act in their client’s best interests. It may also facilitate quicker and easier dispute resolution between firms and clients over terms of transactions and the provision of the service.”

The FCA said market abuse in relation to retail financial advisers is ‘unusual’, but that there have been examples in the past where a recording requirement would have been useful, in detecting whether a retail financial adviser has been facilitating market abuse.

The FCA acknowledged that for some smaller firms, the requirement would represent a significant change, adding it has received concerns in respect to the likely costs involved.

The regulator is asking for all affected firms to contact it in response to its discussion paper on the issue, with their views on likely costs both for the installation of recording solutions and retention costs.

MiFID II regulates the authorisation and the supervision of investment firms, the requirements for the provision of investment services and activities, the authorisation and supervision of trading venues and the requirements for trading activities of financial instruments across the EU.

The MiFID II rules are aimed at promoting the integration, competitiveness, and efficiency of EU financial markets.


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