Apfa calls on FCA to drop Mifid II call recording rules

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Apfa is urging the FCA not to “gold-plate” the telephone recording requirements in Mifid II because the measure is disproportionate for the adviser market.

Apfa was responding to the FCA’s third Mifid II consultation paper, published in September, which included the suggestion to extend the recording requirement to all “Article 3” firms, which includes financial advice firms and corporate finance boutiques.

Under Mifid II firms are required to record telephone conversations and electronic communications that relate to “the reception, transmission and execution of orders, or dealing on own account” and keep them for five years.

In a statement, Apfa says the current suitability report requirement ensures there is an unambiguous record of what is recommended to clients.

Apfa director general Chris Hannant says: “The taping measures are intended to combat market abuse and make sense in the context of trading conditions, where timing is crucial to the outcome and you need to know who said what and when. The proposals are disproportionate in an advisory context.”

Hannant says: “The FCA has adopted a minimalist approach to implementation for the rest of Mifid II – this is sensible and proportionate. I don’t understand why they want to alter this policy in respect of recording calls for article three exempt firms.”

Apfa says it believes the call recording requirement will be particularly costly for small firms.

Its consultation response reads: “These costs would inevitably be passed on to consumers, running counter to the objectives set out in FAMR of making financial advice more accessible to the mass market. For these reasons we believe it would be disproportionate to require firms to record their calls and electronic communications.”

Speaking at the time the consultation paper was published, FCA policy, strategy and competition director David Geale said the requirement to record calls would not place an undue burden on IFAs.

He said: “We believe that the taping of telephone calls need not be onerous or expensive. Technology exists to enable advisers to record and store calls easily and affordably, we therefore believe it is proportionate to require firms to tape calls.”