October 23rd 2018

Several months after introducing the second iteration of the Markets in Financial Instruments Directive (MiFID II), the Financial Conduct Authority (FCA) has announced that non-compliant firms could soon be facing serious penalties - and industry research suggests that up to 40% of firms are not yet ready.

MiFID II Taping Rules
MiFID II requires firms to record all “electronic communications” (including landline/mobile phone calls, SMS, and chat) that relate to the reception, transmission and execution of orders, irrespective of whether those communications actually result in a trade or not and to retain those recordings for a minimum period of five years.

Following a lengthy development phase involving considerable industry consultation, MiFID II finally came into force on 3rd January. However, given the potential disruption on the market, as well as the burden of compliance for individual firms, the FCA’s initial approach to the law’s enforcement was soft, with businesses allowed to make essential changes to infrastructure and policies, whilst maintaining orderly, functioning markets. However, this approach is about to change, and with up to 40% of firms currently in breach of the law, it essential that outlying companies take urgent steps towards compliance.

Speaking before the Treasury Select Committee in June, FCA Chief Executive Andrew Bailey explained this shifting attitude to MP’s:

“We tend to not enforce immediately, so the first [phase] would be supervision rather than enforcement…to prioritise the functioning of markets.”
“We were balancing getting it introduced with markets functioning effectively, giving time for things to settle down… We have a programme of supervision underway and of course we will enforce if people [don’t comply].”

However, recent industry research has found that approximately 40% of firms are still liable to receive penalties relating to the communications recording, retention and retrieval rules mandated by Article 16 of MiFID II. Sanctions for businesses in breach of these rules are severe, with fines reaching €5 million, or 10% of annual turnover.

It's Not Too Late to Act!

Although the MiFID II legislation concerning communications recording may seem complex, achieving compliance doesn’t have to be daunting. Weston Digital Technologies understands the concerns around cost and the practical implications of installing communications recording solutions, particularly for smaller firms, but investing in these technologies need not be prohibitively costly. In fact, embracing a holistic approach to communications recording - as offered by Weston Digital’s Symphony 7 platform - brings many competitive advantages that go beyond mere compliance:

  • Provides centralised (non-siloed) data storage for communications across the business
  • Supports centrally managed retention policies
  • Makes all communications easily searchable
  • Makes all communications readily available to compliance teams and auditors
  • Provides quick, cost effective dispute resolution and trade reconstruction
  • Provides access to emerging analysis technologies
  • Avoids ‘swivel-chair compliance’ (the use of multiple, disparate solutions to meet compliance obligations)
  • Supports a more cost-effective, holistic approach to compliance, risk mitigation and data analysis

If you are concerned about meeting MiFID II recording obligations, or if you would simply like to discuss the benefits of a uniquely competitive Unified Communications Recording and Analysis system, please get in touch today. We would be happy to provide a no-obligation demonstration at your convenience.

MiFID II - An Opportunity

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This white paper will answer:

Who does MiFID apply to?

What does this mean for your business?

How does MiFID present an opportunity?

What should your business do next?

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