Back in March 2017, the Financial Conduct Authority (FCA) announced that no advisory firm, large or small, would be forced to tape client phone calls in order to comply with the Markets and Financial Instruments Directive Part II (MiFID II). It said that keeping a written record of the conversation would suffice instead.

The FCA has now provided more details of the circumstances in which firms will be required to keep a written or taped record of client phone calls.

The key point is that firms will be expected to keep a record of all conversations that result in a transaction being carried out, or else are intended to lead to a transaction.

An example of when a record of the conversation is not necessary is when an adviser delivers a personal recommendation, but where the client then does not give a definitive response and indicates that they would like more time to consider the recommendation.

An example of when a record would need to be kept is if the same client then phoned back and indicated that they wished to accept an adviser’s previous recommendation.

When a written record of a call is made, the FCA says that the firm should record all of the following:

  • The date and time of the meeting
  • The location of the meeting
  • The names of the persons present
  • The name of the person who initiated the conversation
  • Relevant information about the client’s transaction instruction, including the price, volume and type of order, and the time at which the order should be executed

The FCA’s policy statement says that:

“We expect the note to capture any substantive points raised in the relevant conversation that provide material context and colour to the decision taken by the client. In other words, anything communicated from either the client or the adviser that could influence the client’s decision should be captured.

“Good practice for firms would include sharing the notes made of relevant phone conversations with clients on a regular basis in order to ensure their accuracy.”

The FCA refuted suggestions that complying with the new requirements could incur significant costs for firms, by saying:

“We do not agree that the cost of the proposals would be as significant as has been suggested by some industry respondents. This is because the alternative analyses that were submitted typically took more expansive assumptions about the cost of storing phone records and the number of telephone lines that would need to be taped.”

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.