The UK’s financial services watchdog, the Financial Conduct Authority has clarified when an investment adviser must record conversations with their clients.
In a paper published on Monday, entitled Markets in Financial Instruments Directive II Implementation – Policy Statement II, the regulator outlined the changes, that are part of the final MiFID II rules.
The updated rules mean that 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 investment advice relates to a specific transaction that the client wishes to undertake, the FCA said.
However, if the adviser gives advice to the client who then states that they need to go away and think about it, the FCA clarified, that it would not expect this conversation to be required to be recorded as part of the telephone recording regime.
Other record keeping requirements for this first meeting, should be used, i.e. for suitability report purposes.
However, if the client then later phones their adviser to state that they do want to proceed on the basis of the original advice imparted at the meeting, the FCA stated it would expect this phone conversation to be recorded.
“This is because it is clearly the intention of the client that the adviser goes away and makes the necessary arrangements to bring about the wishes of the client, which in this case constitute the client order,” The FCA statement said.
With regards to what details an adviser should put into this note, the regulator stated the information to be recorded includes at least:
- The date and time of the meeting;
- the location of the meeting;
- the identity of the attendees;
- the initiator of the meetings, and
- relevant information about the client order including the price, volume, type of order and when it shall be transmitted or executed.
The FCA stated it would expect an analogous note taken of any relevant telephone conversation to include at least these details as a minimum. A note based just on the minimum details listed above would not provide an analogous outcome to taping telephone conversations, it warned, as this “does not provide the same degree of consumer protection”.
“We are therefore including further guidance in the rules that, in addition to the above details, the note should capture all the main points of the full conversation that are relevant to the order,” the FCA statement said. “This approach will ensure that firms do not omit relevant details from the note, providing an accurate and contemporaneous record of the conversation.
“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,” the FCA said.
To read the FCA’s full report into financial adviser phone taping rules, click here.