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Demonstrating Compliance of Investor Protection

MiFID II has a number of amendments pertaining to investor protection. Firms must act honestly, fairly, and professionally in accordance with the best interests of its clients and put their customers’ interests at the centre of their corporate culture.

Therefore, firms must:

  • Understand their clients investing criteria in order to make suitable recommendations.
  • Provide products that match the needs and investment objectives of their customers.
  • Provide clear and relevant information.
  • Provide reports to clients, including an assessment of suitability.
  • Distribute marketing communications that are fair, clear, and not misleading and should be clearly identifiable as such.
  • Avoid remuneration and sales targets that incentivizes staff to recommend inappropriate financial instruments to retail clients.
  • Demonstrate to regulators that firms know the investing criteria of their clients and that the recommendations are suitable.

Demonstrating compliance sounds easy enough until you consider the many different ways we communicate today. The last few years have seen a dramatic shift in communication patterns that have decreased the dependence on email. Social media, propriety channels, and collaboration tools are common workplace communications channels today. Not only for enhanced productivity, but also for competitive advantage.

In 2015, it was reported that employees of one of the largest Swiss banks sent more instant messages than emails for the first time. Email accounted for just 48 percent of the total communications sent by its employees.

An initial conversation about a product or service might start on Twitter, move to a more private channel such as Skype for Business and finalize via email. Proving an understanding of the customer’s needs and the recommendations given in context and in time-related order just became a little more complicated. Even more so when you consider the review may be two or three years later and the employee may have left the firm.

While some organisations continue to utilise their email-centric archiving systems, there is a problem with this approach. 

What makes social applications so unique and compelling is their dynamic, interactive nature. People chat in real-time with one another, post blog entries, delete comments to discussion boards, retweet messages, etc. However, legacy email archiving systems do not capture social content in context. Instead, they generate a separate email for each event such as a post, reply or comment, making it difficult to follow interactions even on the same channel, let alone across several.

Under MIFID II, firms must be able to promptly reconstruct trades upon request from clients and regulators. Compliance with supervision should ensure that the organisation has acted responsibly and fairly with investors. But only by storing social interactions as conversation threads, instead of as separate email messages will reviewers and auditors be able to quickly and easily grasp the precise meaning of interactions and events, saving you time and money in the long run.

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