Alex Tebbs, founder, VIA
The impending updates to the MiFID regulation will affect all finance businesses, from the smallest startups to the largest corporations. While we work to make the final required changes within our businesses ahead of the January deadline, for many, the complexities of MiFID II mean there are still plenty of challenges ahead.
The complex framework of MiFID II means it will touch various parts of financial operations. One area set for stricter scrutiny is that of communication; more specifically, how the finance industry communicates with clients and internally, and importantly, how those communications are recorded thereafter.
The communications requirements of MiFID II
MiFID II is the latest incarnation of the MiFID regulations that originally date back to 2004. The updates to the regulations are intended to protect the financial markets and their customers, by facilitating greater transparency and mitigating the risks associated with the financial crisis of the early 2000s.
The communication element of MiFID II means that firms must record all communications with their clients where a transaction is expected, achieved or intended to occur.
According to the official documentation of MiFID II’s organisational requirements, “records shall include the recording of telephone conversations or electronic communications relating to, transactions concluded when dealing on own account and the provision of client order services that relate to the reception, transmission and execution of client orders”.
This means that finance professionals will need a solid platform on which to record communications, and an accessible portal through which to reach those communications records should the need arise.
The communication challenge
Consider the implications of these regulations across multiple people, multiple departments and even multiple locations. In the multi-device world, employees use communications across landlines, mobile telephones, instant chat, video calls, Skype and so on. It is a challenge to record communications across all of these platforms.
With that said, the implementation of a tool like unified communications (UC) can be a one-stop solution; with UC, all communications are moved onto one platform, meaning that comms recording is in place across all, and access to those recordings is via one portal.
UC can be implemented very quickly – especially where a cloud-based solution (as opposed to an on-site solution, which requires hardware) is used.
Whether you choose to move your communications to a unified communications platform, or to retain your existing separate comms tools, every finance business will need to find a way to record and retain those communications once MiFID II comes into play.
Security considerations of comms recording
MiFID II is the big change expected for the finance industry in 2018. But another regulation update impacting businesses across the board in 2018 will be GDPR, with changes to the data protection regulations highlighting the importance of security.
With MiFID II, we’re talking about recording communications, but with GDPR, we’re talking about protecting data. Each affects the other, so it’s important when considering your post-MiFID comms strategy that security is also addressed.
One must-have component of these regulations is the use of end-to-end encryption.
Whether you’re using cloud technology, a mobile phone or email, there’s a risk that messages can be intercepted and secure information divulged to the wrong people. This risk is eradicated with the use of encrypted communications, whereby all information passing is rendered useless to an interceptor.
There are many companies out there that offer tried-and-tested encrypted communications solutions, and the benefit to using a third party provider for this is that they will pay people to try and hack their system and identify any potential vulnerabilities far faster than an in-house solution could.
As well as a fully encrypted system, another option is direct connect. This means you have a dedicated line for your communications (telephone and electronic) over which your information can pass, without crossing the public telephone system or public superhighway, mitigating any chances of ‘telephone tapping’.
Essentially, whether you’re using a cloud based communications platform or a more traditional tools such as basic email providers or instant messaging, security is, and will continue to be, a hugely important concern for the finance industry as we move into 2018 and beyond.