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Are your customers ready for MiFID II?

How might new MiFID II legislation affect telecoms provision in the finance sector? Dave Millett of independent telecoms brokerage Equinox considers the options of affected firms

David Millet
David Millet

The Markets in Financial Instruments Directive (MiFID) regulates firms that provide services linked to ‘financial instruments’, including IFAs and mortgage brokers, credit institutions, corporate finance companies, investment firms and brokers/dealers.

MiFID has applied in the UK since November 2007, but is now being revised to strengthen investor protection. Under MiFID II rules, set to take effect from January 3, 2018, financial services companies must take all reasonable steps to record telephone calls, electronic communications and face-to-face meetings that relate to actual or possible transactions.

Records must reveal the terms of any orders placed and will need to be kept for at least five years and, in some cases, for seven years or for the duration of the client relationship.

The range of companies covered has been extended to include commodities brokers, previously excluded, and insurance brokers who take cover products with an ‘investment element’ i.e. where the maturity or surrender value is wholly or partially exposed, directly or indirectly, to market fluctuations.

In order to comply with the rules, customers of yours that are affected may have to upgrade their telecoms systems to support the recording of both fixed and mobile calls. Dave Millett of independent telecoms brokerage Equinox says affected firms have a number of options, depending on their existing set-up. These are:

Landlines/SIP
Landlines – no system

Options:
Recording just a phone is now possible via cloud-based providers, but firms may have to consider a switch to an FCA-compliant VoIP provider as the most cost-effective option;

Phone system with landlines or SIP

Options:
A firm could add an on-premise call recorder. Alternatively, some SIP providers offer in the cloud recording, but the firm would need to check its FCA compliance and storage costs. On-premise solutions tend to have quite a large capital outlay but were developed specifically for this purpose;

VoIP/Skype for business

Options:
Firms will need to ask their supplier to provide written confirmation from their legal/operational teams as to whether the call recording is FCA- compliant. A lot of VoIP providers do not offer FCA-compliant recording and instead just use Wav files. Firms will also want to know how long calls are stored for and the costs involved.

Mobiles
Mobiles can be a bit more challenging, and if the firm’s employees use SMS, it complicates matters further. They have a number of options:

1
Ban mobiles
Pros: Simple
Cons: Reduces productivity and flexible working

2
Add mobile clients
Pros: Can add to existing mobiles. All recordings in one place
Cons: Can’t record SMS

3
Switch to recordable sims
Pros: Records calls and SMS
Cons: Requires being out of contract on your current mobiles

In the same way that financial services firms will need to assess how they are affected and what they must do to comply with new regulations, suppliers will need to make sure their offering meets the needs of affected customers so that they can extend their business relationship to encompass recording from landlines and mobiles.

Dave Millett has over 35 years’ experience in the Telecoms Industry and now runs Equinox, a leading independent brokerage and consultancy firm. He works with many companies and regularly advises telecom suppliers on improving their products and propositions.

www.equinoxcomms.co.uk
Twitter: @equinoxcomms
LinkedIn: http://www.linkedin.com/pub/dave-millett/2/17b/a94

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2020