What You Need to Know About the FCA

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What You Need to Know About the FCA

July 07, 2017

We’re all familiar with call recording in one form or another. For most of us, when we think of call recording, we automatically hear the automated voice telling us that “this call may be recorded for quality assurance” when we contact a call center. For others, like Taylor Swift and Kanye West, call recording represents a capability that, if you used incorrectly, can hold serious consequences.

There are quite a few legal restrictions surrounding call recording, and these rules often vary by state, making them even harder to follow. Data protection laws, PCI-DSS, HIPAA and so on all put restrictions on how call recording can be used. This is great because it ensures privacy protection for customers and makes identity theft more difficult, but it also causes a lot of companies to underutilize call recording.

However, the financial service industry is actually encouraged to record calls, which is a concept other industries are not used to. According to Paul Newham writing for CommsTrader, rules set out by the Financial Conduct Authority (FCA) in its Conduct of Business Sourcebook actually demand that member organizations do more call recording.

For those unfamiliar with the FCA, it is an independent regulatory body for the UK financial service industry. It’s funded through subscriptions from 56,000 member organizations and is licensed by the UK government to oversee compliance in the marketing and sales sectors.

The FCA’s rules regarding call recording are contained in COBS 11.8. The FCA states, “The rules in COBS 11.8 oblige firms to retain records of specific telephone conversations and electronic communications of client order services that relate to the reception, transmission and execution of client orders and proprietary trading. It includes communications that are intended to result in a transaction, even if ultimately they do not.”

Essentially, this means that any call relating to the sale, marketing or promotion of financial instruments must be recorded by the sellers. Financial instruments include equities, loans, bonds, stocks, derivatives and currency and so on. These rules are applicable to banks, stockbrokers, investment managers and commodities dealers, which account for about 30,000 organizations within the FCA’s jurisdiction.

Under the law, each one of those organizations has to invest in call recording software or services, ensure all staff are trained to monitor for compliance, create and manage an audit trail for relevant communications, and store all recorded communications for a minimum of six months.

The concept of recording every call may be a strange one to companies from other industries or countries, particularly in the U.S., where we’re used to legal wars being waged over inappropriate call recording sessions. However, the FCA has good reason for implementing these rules. As Newham points out, the financial instruments market is very complex and the industry has been largely affected by scandals resulting from he-said-she-said claims. Before the rules were in place, firms were known for manipulating the markets and doing deals with each other in order to reap all the benefits.

Thanks to the call recording rules laid out by the FCA, these dealings have ended. After all, it’s much harder to get away with suspicious behavior if every conversation can be listened to.

Edited by Maurice Nagle

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