All Phone Calls With Brokers In The UK Now Recorded; Coming Soon To Europe and America

Posted on 9th Dec 2011 @ 12:08 PM

If you talk on the phone to your broker or financial analyst in the UK, the call is being recorded, whether he or she is on a landline or mobile. You can expect such requirements to be enacted in the U.S. and throughout the EU soon. It doesn’t matter what kind of phone the representative is using in Britain; as of two weeks ago the rules changed.

The Financial Services Authority (FSA)  is the regulator of the financial services industry in the UK. In March of 2008 the FSA enacted a regulation known as COBS 11.8.10R to require alltelephone conversations and electronic communications to be recorded to and from traders, brokers, or anyone engaging in financial transaction that were likely to result in a trade. At that time the rules exempted calls to and from mobiles. The requirements were incorporated within the Conduct of Business Sourcebook (or COBS) which sets forth practices for the investment world in the UK.

The regulation was amended in CP 10.7 in November 2010 removed the exemption to include cellular and went into effect on November 14, just two weeks ago.

This regulation has as its priority the prevention, deterrence, and detection of market abuse and to develop useable evidence for use in investigations and prosecutions.

The FSA believes its requirement will accomplish three main results:

• Recorded communications may increase the probability of successful enforcements
• This reduces the expected value to be gained from committing market abuse, and
• This, in principle, leads to increased market confidence and greater price efficiency.

In the original 2008 rule, firms were required to record

”relevant communications’ and keep them for six months. ‘Relevant communications’ refer to voice conversations and other electronic communications that involve the receipt of client orders and negotiating, agreeing and arranging transactions in the equity, bond and financial and commodity derivatives markets.“

The FSA noted that if any relevant conversation (from voice, SMS to IM) be received or commenced on private communication equipment, they would expect the call to be terminated immediately and the conversation diverted to a recorded business line.

The European Union is also considering similar legislation in (Article 12(1) of the Market Abuse Directive and Article 51(4) of the Markets in Financial Instruments Implementing Directive.

These rules give Member States discretion to decide if investment firms have to record telephone conversations or electronic communications involving client orders. While many Member States have their own taping requirements, which can apply to fixed lines as well as mobile phones, regimes differ significantly across the European Union (EU).

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