Voice archiving is critical to MiFID II compliance
On 3 January 2018, Europe will see MiFID II and MiFIR come into place. With core principles focused on fairer, safer and more efficient markets, this is a significant piece of legislation. The MiFID II directive impacts financial services firms that operate and/or do business with European firms providing investment services in the European Economic Area, so the implications are global.
While most financial firms in the European Union (and those outside the region that do business with the EU) are aware of MiFID II and know it will impact them from a trading governance perspective, many don’t understand how the expanded rules will affect their recordkeeping requirements. Also, record collection and discovery of this magnitude is beyond the current capacity of many firms.
The requirements for recordkeeping under MiFID II are certain and extensive. Financial firms must prepare for the new rules now, to avoid running out of time before MiFID II is in place.
Financial firms will be required to have systems and processes to capture, retain and reproduce complete records of all services, activities and transactions on firm and client accounts. This includes all telephone calls and voice messages on fixed lines and mobile devices, and all forms of electronic communications including email, SMS/text messaging and instant messaging. All records must be discoverable, even if they don’t lead to a transaction.
Key MiFID II Recordkeeping Requirements that will Impact Voice and Electronic communications
A fundamental operating requirement of MiFID II in relation to recordkeeping is laid out in Article 16 of MiFID II regulations:
“An investment firm shall arrange for records to be kept of all services, activities, and transactions undertaken by it, which shall be sufficient to enable the competent authority to fulfill its supervisory tasks, perform enforcement action, and ascertain that firms have complied with all obligations to clients, potential clients, and the integrity of the market.”
MiFID II requires financial firms to:
- Expand Their Governance. The record-keeping requirement applies to all phone calls and electronic communications intended to result in a trade.
- Firms must retain records, including recordings of phone conversations on fixed or mobile devices, and all electronic communications, including email, social media, instant messaging, text/SMS messaging, and so on.
- All communications must be kept, whether a trade happens or not.
- Records must be kept in context, across all communications and collaboration channels on all approved devices. The content of each communication determines its status as a record, not the communications channel.
- Firms must establish supervisory policies and procedures to ensure that permanent employees and contractors comply with MiFID II. Systems must be in place to protect organisational and client data. Firms must demonstrate enforcement of policies and procedures related to electronic communications.
- Include all Communications in Recordkeeping. Firms must ensure all electronic communications and telephone calls on privately owned and organization-issued equipment or devices are retained. Communications for permanent and contracting staff are included in this requirement. Firms must take all reasonable steps to:
- Record relevant phone conversations and electronic communications that are created, sent, or received by devices provided to an employee or contractor by the organization.
- Prevent an employee or contractor from making, sending, or receiving relevant phone conversations and electronic communication on privately-owned devices that the organization cannot record or copy.
- Follow Specific Retention Periods and Presentation Rules. Firms must retain these electronic communications records for five to seven years (depending on jurisdiction) and provide records requested by a client or a National Competent Authority.
- Records must be stored in an unalterable (‘durable’) medium such as Write-Once-Read-Many, which allows for records to be replayed or copied.
- Records must be retained in a format that does not allow the original record to be altered or deleted. Records must be searchable and readily available upon request.
- Have Records of In-Person Communications. Financial firms often make orders through other channels, such as business meetings and in one-on-one conversations. These communications must also be:
- Stored in a durable medium, and include the documentation of client orders made at meetings.
- Inclusive of the content of relevant face-to-face conversations. For example, a discussion with a client must be recorded with written minutes or notes and retained by the firm.
It’s Time to Prepare for MiFID II NOW
Smarsh is now the only archiving provider directly capturing mobile voice content directly from the carriers, following the company’s acquisition of London-based Cognia. Cognia is a recognized pioneer in voice archiving, audio search, and analytics, and the pairing of these capabilities with The Archiving Platform from Smarsh gives businesses the most comprehensive solution that handles voice and audio with all other types of electronic communications in one place.
For financial firms in the European Union that have MiFID II recordkeeping and supervision requirements, Cognia’s cloud-based voice archiving tools, combined with The Archiving Platform from Smarsh, provide the secure capture of incoming and outgoing voice/audio communication from fixed-lines, as well as from leading mobile carriers.
Carrier direct capture is the most reliable and automated method to capture content for archival, and it’s easily deployed without the need for additional device software. Smarsh clients can quickly and securely search, analyse, monitor and produce voice and audio content alongside all other electronic information content such as email, social media, and text messages. Audio content can be found using phonetic search capabilities and cutting-edge transcription technology, and conversations can be reconstructed in their proper context across different communications channels. As a result, firms can meet MiFID II requirements without the hassle of searching through separate archives.
Smarsh enables the entire workflow needed to capture, retain, supervise and produce all the electronic communications records required by MiFID II and MiFIR, from voice to email and social media, and much more.
Founded in 2001, Smarsh helps more than 20,000 organizations meet regulatory compliance, e-discovery and record retention requirements. The company is headquartered in Portland, Oregon, with offices in New York City, Boston, Raleigh, N.C. and London.
For more information, visit www.smarsh.com, follow @SmarshInc on Twitter or like Smarsh on Facebook at www.facebook.com/SmarshInc
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