MiFID II Communication Reporting: Stay Compliant

As part of MiFID II’s aim to generate greater market transparency, firms are now required to record all voice communications which result in a transaction being completed. These requirements extend to include trades made by telephone, text, any kind of instant messaging and video calling.

In order to fulfil these stringent reporting requirements, in practice, firms must provide comprehensive proof that all communications which may result in a trade being made are being closely monitored and recorded. The customer must be informed that these calls are being recorded, must be able to store the recording securely, and be able to retrieve the recording upon request.

However, the FCA found that, in 2018, over 1,000 investment firms were falling short of ESMA’s communication and transaction reporting requirements. What is the cause of this poor reporting quality? 

One potential explanation is a lack of recording checks. It is not enough to assume that calls are being recorded; daily checks should be implemented to ensure that recording is being executed properly. 

Better organisation of recorded files should also be practised to ensure the timely and secure retrieval of the sensitive stored data. 

By implementing an automated testing system to ensure that recording systems are working correctly, firms will be able to avoid heavy penalties being imposed upon them by National Competent Authorities, such as the £34,344,700 fine levelled against Goldman Sachs by the FCA.

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