According to the regulator, under the final Mifid II rules advisers are required to record conversations that result in a transaction being undertaken or that are intended to result in a transaction being undertaken.
The new rules were listed in the regulator’s final policy statement on the implementation of Mifid II from January 2018 published on Monday.
Smaller advisory firms can decide whether to tape conversations or take a full written note of what was said, the FCA confirmed.
However if, for example, the adviser imparts advice to the client who says that they need to go away and think about it, the FCA clarified it would not expect this conversation to be recorded for the purposes of the telephone recording regime.
Investment advice
The City watchdog has also extended the scope of some areas of Mifid II in its final policy paper on the upcoming rules to ensure the “right regulatory regime” for the UK.
Among the FCA’s additions was a requirement for discretionary fund managers (DFMs) to tape conversations with clients and the application of new research inducement provisions to collective portfolio managers as well as the investment firms previously included.
DFMs had been exempt from upcoming rules to tape client conversations, but will now be required to record chats relating to “transactions concluded when dealing on own account and when providing client order services”.
Collective portfolio managers, not only investment firms subject to Mifid II, will now be subject to rules regarding inducements for investment research in what the FCA claimed will “improve transparency and accountability over costs passed to investors” and ensure greater competition.
Added complexity
Phil Lynch, head of markets, products and strategy at SIX Financial Information, said the FCA guidance would add more complexity to the rules.
“This final guidance from the FCA suggests that the UK regulator may yet add further nuances, which will add additional complexity to Mifid II rules for European financial institutions. The UK would not be alone, as other local authorities are also establishing local definitions,” Lynch said.
He added: “This is why the industry needs to find a way to develop standardised approaches that can be shared, automated, and scaled to a higher degree. Only then will firms be able to interact together using the same information.”
