View more on these topics

FCA gives IFAs guidance on Mifid II recording rules

Regulator also confirms decisions on new independence standards and inducements for restricted advice

The FCA has fleshed out what it expects from advisers adopting new recording requirements under the EU’s Mifid II rules.

In a 524-page policy statement today, the FCA has stuck to its position that financial advisers would not have to tape face-to-face sessions, but would have to either tape telephone calls or provide an “analogous” written note of them.

Mifid II requires firms to record telephone conversations and electronic communications that relate to “the reception, transmission and execution of orders, or dealing on own account”.

The FCA laid out what information would be required as a minimum under the EU rules.

  1. the date and time of the meeting,
  2. the location of the meeting,
  3. the identity of the attendees,
  4. the initiator of the meeting,
  5. relevant information about the client order including the price, volume, type of order and when it shall be transmitted or executed

However, it says that when noting this information as opposed to recording the call, just writing that information would not meet the same consumer protection standard.

The FCA says that in order to meet this, firms should “capture all the main points of the full conversation that are relevant to the order.”

10 things you need to know about Mifid II

The regulator says: “We expect the note to capture any substantive points raised in the relevant conversation that provide material context and colour to the decision taken by the client. In other words, anything communicated from either the client or the adviser that could influence the client’s decision should be captured.

“Good practice for firms would include sharing the notes made of relevant phone conversations with clients on a regular basis in order to ensure their accuracy.”

The FCA clarifies that cases where clients say they do not want to proceed with a particular order also need to be recorded or taken note of, but does not require advice to be recorded unless the discussion “leads to or is clearly intended…to lead to a subsequent ‘order’ from the client.”

Despite some trade bodies fighting against the plans, the FCA remains committed to recording being needed.

It says: “We do not agree that the cost of the proposals would be as significant as has been suggested by some industry respondents. This is because the alternative analyses that were submitted typically took more expansive assumptions about the cost of storing phone records and the number of telephone lines that would need to be taped.

FCA rolls back on Mifid II client call recording rules

“We do not agree that the number of published Financial Ombudsman Service cases per year alone is a good indicator of the likely benefits that taping would bring.”

Independence and inducements

Also in the paper, the FCA confirms it will adopt the Mifid II standard for independence.

The FCA’s current standard, that independence requires a comprehensive and fair analysis of the relevant market and be unbiased and unrestricted, will be superseded by a “sufficiently diverse” look at the market, with some retail investment products excluded.

However, the FCA says there is unlikely to be any widespread, significant implications from the change, though some IFAs may narrow the scope of their advice while remaining independent.

Mifid II bans inducements for independent advice, and the FCA has confirmed it will extend this to restricted advice to retail clients. It stopped short of extending this to professional clients however.

Recommended

EU-Euro-Europe-Eurozone-700x450.jpg

Fund groups: We’re ready for Mifid II research rules

The majority of fund management groups have said they will be compliant on Mifid II rules on time, but research providers are still failing to engage with groups on pricing setting, a survey shows. Fintech firm RSRCHXchange reveals asset managers are fully aware of the changes MifidII will bring on the way investment research is […]

Chris-Hannant-Headshot-in-2013-700.jpg

Apfa: FCA was right to back down over Mifid II

The FCA recently published its mission statement and business plan setting out what it is going to do over the next year. I am often asked what I think of these plans. My answer is that it depends on how the regulator lives up to its professed intentions. In other words, what it does is […]

Stockmarket-Stock-Market-FTSE-Performance-700x450.jpg

FCA levels playing field for investment trusts with Mifid II decision

The Association of Investment Companies has welcomed the FCA’s decision not to consider investment company shares to be automatically “complex” under Mifid II. The AIC says the suggestion that investment trusts should fall under this definition had put them at a competitive disadvantage to other investment products. Retail investors in complex products must be assessed for “knowledge […]

Woodford-Neil-700x450.jpg

Woodford defends bet on UK housebuilders

Woodford has defended his recent bet on UK housebuilders arguing the country hasn’t built enough houses to meet demand since 1990. The star fund manager has shirked housebuilders for most of the last 15 years due to a lack of confidence in the outlook for UK growth and concerns about house valuations. But in the […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

There is one comment at the moment, we would love to hear your opinion too.

  1. suit,shirt,tie,shoes-check, car keys-check, client files-check, wire-??!! Oh heck:-(

Leave a comment