The Association of Professional Financial Advisers (APFA) has urged the Financial Conduct Authority (FCA) not to over-react when implementing the requirements of the European Union’s Markets in Financial Instruments Directive II (MiFID II).
APFA is particularly concerned that advisory firms will apparently need to record client phone calls as a result of the Directive. The FCA announced back in September 2016 that it was proposing to require all Article 3 firms – which includes all financial advisory firms it authorises – to record these calls. The consultation paper simply said that the regulator would “consider alternative approaches for smaller advice firms to help lower costs,” without giving any specific details of what this might entail.
MiFID II says that calls which relate to “the reception, transmission and execution of orders, or dealing on own account” should be recorded and retained by the firm for a period of five years. The Directive will come into force in the UK at the start of 2018, and the Brexit vote will not have any impact on its implementation.
The Association notes that the primary purpose of requiring call recording under MiFID II is to combat market abuse, an issue which is of limited relevance to small and medium sized advisory firms. It adds that firms are already required to produce a suitability report as a record of the interactions between firm and client.
However, unless and until any official indication to the contrary is received, firms should assume that they will need to record client calls from the start of next year, and should start planning for this well in advance.
APFA director general Chris Hannant said:
“The taping measures are intended to combat market abuse and make sense in the context of trading conditions, where timing is crucial to the outcome and you need to know who said what and when. The proposals are disproportionate in an advisory context.
“The FCA has adopted a minimalist approach to implementation for the rest of Mifid II – this is sensible and proportionate. I don’t understand why they want to alter this policy in respect of recording calls for article three exempt firms.”
FCA policy, strategy and competition director David Geale has previously suggested that he does not believe the call recording requirement will place an undue burden on firms, by saying:
“We believe that the taping of telephone calls need not be onerous or expensive. Technology exists to enable advisers to record and store calls easily and affordably, we therefore believe it is proportionate to require firms to tape calls.”
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