While comprehensive planning for compliance is a bit tricky due to some uncertainty as to how the regulation’s implementation rules and guidance will pan out, the expanded record-keeping requirements related to communications are likely one of the more predictable and onerous requirements. In particular, requisite trade reconstruction records now extend to both structured and unstructured records involving all financial instrument transaction communications, including email, chat messages, and voice mails, minutes from client meetings, in addition to requisite business documents and files. This is an expansion from MIFID I which more narrowly required retention of telephone conversation records.
Also, in addition to completed transaction communications, record-keeping now more broadly includes those related to conversations or communications that “do not result in the conclusion of such transactions or in the provision of client order services,” with applicability to a greater scope of regulated parties. The retention period for these records may be “up to seven years.”
As guidance, the following include considerations in preparation for company implementation, management, and preservation of communications in light of MIFID II’s anticipated expansion:
Set Parameters for Client Communication Channels: Be proactive in defining the permissible channels of communications through adoption by company policies. If client calls and related voicemails will be captured on company issued devices only, for example, make sure to implement this standard. By providing the acceptable methods of communication, reconstruction and preservation of all transaction communications can be more closely monitored and preserved.
Implement Media and Application Access Restrictions: It may be wise to create policies concerning administrative access restrictions for official company media channels and/or applications such as Facebook, Twitter, etc., in order to maintain centralized control. Such restrictions will reduce the risk of unauthorized deletions of regulated communications.
Clearly Define Regulated Communication Records for Preservation: Providing a clear definition of what constitutes a regulated communication record is important. As noted, the MIFID II is quite expansive and as such the definition of the record should broadly include any communication related to a transaction or potential transaction, regardless of whether it results in the completion of a transaction. It should be clear that the record may encompass various communication conduits and media formats.
Provide Procedures for Preservation: Make sure procedures are properly conveyed with regard to the process for preserving communications. There is an abundance of auto-archival solutions out there for a variety of media and applications, but chances are they won’t cover every possible communication facet within a company. This is particularly prudent with the MIFID II which requires client communication minute records to be created and preserved.
Through a bit of planning for policies, procedures, and education, companies have the opportunity now to increase preparedness and likelihood of compliance with MIFID II’s anticipated early 2017 implementation.
If you are interested in learning more about preparing your business for compliance with MIFID II, connect with the Zasio Consulting Division today.
Disclaimer: The purpose of this post is to provide general education on Information Governance topics. The statements are informational only and do not constitute legal advice. If you have specific questions regarding the application of the law to your business activities, you should seek the advice of your legal counsel.
Author: Jennifer Chadband, IGP, CRM, ECMp
Senior Analyst / Licensed Attorney