The world of financial compliance is swiftly changing and keeping up with new regulations is an onerous challenge. The beginning of 2018 will see the implementation of a central statute: The Market in Financial Instrument Directive II (“MiFID II”). This new European regulation and its accompanying Markets in Financial Instruments and Amending Regulation (“MiFIR”) are a set of regulatory rules created 11 years after the first set of MiFID rules, often defined as the cornerstone of capital markets’ regulation in Europe.
Initially, MiFID II was drafted to address the shortcoming of the original MiFID which focused on opening up markets to greater competition. The need for a second version was also driven by the necessity to cope with ever-changing financial markets and to adopt lessons learned during the 2008 financial crisis.
There are two main components of the new directive: one focusing on market issues related to trading activities (i.e. transparency requirements, position limits, market data storage, etc.) and one that is aimed at reinforcing investors protection on the clients’ side related to investment services (i.e. independent investment advisory, cost transparency, fixed price etc.)
The regulation touches multiple facets of the financial services industry and requires implementation of significant changes to processes by institutions at multiple levels. The challenge is complex as the deadline is tight. Originally scheduled to be mandatorily enforced in January 2017, in 2016 the regulators postponed the effective date to January 1st, 2018, as the first date was too soon for state members to transpose the Act into national laws.
Among the forest of measures, one specifically addresses the problem of financial communications compliance, in terms of record keeping and digital storage. Today, under MiFID, there is no mandatory requirement to record telephone conversations or electronic communications, although Member States have the discretion to require it.
In order to increase certainty, investor protection and prevention of market abuse, MiFID II has introduced organisational requirements stating that investment firms have to keep records of all services and transactions undertaken to enable compliance to supervise their work and to help them deal compliantly with clients, respectfully of the integrity of the dealing.
Records include telephone conversations or electronic communication relating to order transactions or execution of client orders (among others). The requirement extends to communications that are intended to result in these transactions even if they do not in fact happen. Records will need to be retained for a period of five years, and potentially a further two years where the MiFID II member state national competent authority requests it.
Implementing such processes and record keeping implies significant challenges for financial services. Some of these challenges are listed below:
· Institutions will have to retain great volumes of data, certainly much more than before and so they have to decide where to store it and most importantly, how to store it securely.
· Such specific requirements may not be already built in the investment firm’s infrastructure. So, organisations will have to choose whether they want to manage this data internally or to outsource it.
· The new record keeping requirements target both voice and text-based communications. In today’s multi-channel workplace, this potentially means implementing multiple systems to capture everything adding to costs and requiring additional expertise to manage.
· Recording of conversations and client interactions need to happen seamlessly and without interruption in order not to affect the client’s user experience.
· With MiFID II requirements becoming effective January 1st, 2018, financial organisations have three months from now to become compliant.
APrivacy solves all these challenges and helps financial companies to comply with MiFID II regulation by providing a single security platform which supports multiple channels and data sets, thus reducing complexity and costs for banks, investment firms, and insurance companies. From a compliance point of view, all information which passes through the APrivacy platform is fully recorded, stored and maintained behind the corporate firewall. The invisible security technology allows for a seamless and native user experience that meets clients’ high expectations. If you would like to lean more about APrivacy, please contact us.
Digital Security Perfected – APrivacy Ltd. is an award-winning company which combines military-grade data security with a seamless user experience on any platform, any device, anywhere. APrivacy Ltd.’s enabling technology now allows the financial services industry to confidently communicate with clients using their favourite channels leading to increased revenues and reduced costs while meeting the strictest regulatory requirements.
