It now appears that the UK’s financial advisers will not be required to tape telephone calls with clients, and that keeping a written record of the conversation will suffice instead.
Back in September 2016, the Financial Conduct Authority (FCA) unveiled proposals that would have seen advisory firms required to tape all client calls, in order to demonstrate compliance with the European Union’s Markets in Financial Instruments Directive II (MiFID II). At the time, it merely made mention of considering some sort of exemption for the very smallest firms, but added that the proposal should be relatively easy for firms to implement. Its policy, strategy and competition director David Geale previously said:
“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.”
However, in March 2017 the regulator announced that no advisory firm, large or small, would be forced to tape client phone calls.
The latest FCA policy statement on MiFID II says on this subject:
“Based on the responses received and following extensive industry engagement, we have concluded that additional flexibility for all Article 3 retail financial advisers is appropriate. This is because the business model of many of these firms is such that a full taping obligation may not always be proportionate.
“As such, we will propose that these firms, irrespective of size, can comply with the ‘at least analogous’ requirement by either taping all relevant conversations or taking a written note of all relevant conversations.”
Firms should however await the next MiFID II policy announcement from the FCA, expected in June. This will provide more details of what details firms will need to capture in their written records of conversations with clients.
Advisers’ trade associations have campaigned against the need to record calls, so are likely to welcome the latest announcement. Chris Hannant, director general of the Association of Professional Financial Advisers, suggested that the recording requirement was of limited relevance to financial advisers, commenting:
“This aspect of MiFID II is aimed at monitoring firms like stockbrokers to prevent market abuse. It is not about investment advice and the FCA is going over the top by gold plating the rules. Firms need to keep a record of the advice they have given but to suggest a blanket requirement to record all conversations is not what MiFID II intended.”
MiFID II comes into force on January 3 next year. Other changes as a result of the Directive will include: a requirement to disclose all product and other charges to investors upfront; a different definition of independent financial advice; an increased emphasis on assessing clients’ capacity for loss before giving investment advice; and new rules on the receipt of inducements.
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.