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MiFID II: don’t let compliance slow you down

2018 is being marked as ‘the year of regulation’, with new legal requirements affecting a number of industries. In addition to the upcoming EU General Data Protection Regulation (GDPR) deadline, the financial services sector has already seen two major regulations come into effect – one of which is the Markets in Financial Instruments Directive II (MiFID II). Companies operating in the EU should have been compliant with this regulation from 3rd January 2018.  However, in December, just two weeks before the deadline, European markets authorities granted banks and their clients an extra six months to comply with the rules after it was revealed that as many as 20% of their clients still did not have their own unique alphanumeric code, meaning investors could be locked out of deals. Despite this extension, regulators will still demand evidence that organisations have made every effort to comply.


MiFID II, although an EU directive, is not limited to firms based in the European Union. It has many cross-border implications and will require organisations that trade or have dealings within the EU to comply. Some international trade and regulatory bodies have implemented a grace period – for example, the U.S. Securities and Exchange Commission (SEC) has stated it would grant Wall Street a 30-month grace period for compliance.


Due to the sheer volume in transactions, the financial services sector is one of the most heavily regulated industries, and for many investment firms, this has been the first experience of such in-depth regulatory intervention. The goal, according to the Financial Conduct Authority (FCA), of MiFID II is to make European financial markets more resilient, transparent and investor-friendly. As such, organisations must keep records of all services, activities and transactions undertaken for a minimum of five years, including all telephone calls, text messages, instant messages and social media interactions. It is also essential that all the records are discoverable, especially when conducted on a mobile device.


According to JWG, 90% of buy-side firms were at risk of non-compliance by the MiFID II deadline, and a large number of firms admitted to leaving compliance to the last minute, with 44% of IT and risk and compliance managers saying they would wait until the legislation came into effect in January to become compliant.  Adopting a mobile compliance technology which allows organisations to capture conversations on all endpoints, including smartphones, tablets and wearables can help speed the path to compliance and reduce the risk of incurring heavy penalties.


A communication capturing solution can also remove the need to take detailed notes. This will not only save a lot of paperwork, but will eliminate uncertainty over who said, and agreed to what, allowing traders to concentrate on what they do best – closing deals, rather than worrying about whether they’re recording conversations accurately.


The recording function of a mobile compliance tool provides a perfect balance between the customer experience and compliance. If or when an employee leaves an organisation, the handover process will be seamless – allowing the new recruit to simply listen to the most up-to-date audio records and pick up from their predecessor, eradicating any potential concerns regarding previous deals or verbal agreements the customer may have had.


In addition to improving the customer experience, mobile compliance platforms offer the opportunity to improve the quality of service employees provide their clients. Analysis of telephone conversations allow the team to improve the way they interact with their clients. Internally, line managers can use the recordings during training and development sessions; coaching team members on best practices, or on how they can upsell on other services within the business.


With the introduction of the likes of MiFID II, the finance industry has never been under such scrutiny. Firms are now subject to several mandates focused on security, recordkeeping, and risk management. Given the substantial penalties and reputational damage that could result from a lack of compliance, ignoring regulatory guidelines is not an option. To be secure and productive in the Enterprise of Things, businesses need to be capable of managing their entire infrastructure from a single console.


Balancing regulatory compliance with productivity doesn’t have to be difficult. While MiFID II has required changes within businesses, it should not be seen simply as an additional cost. Businesses should recognise the opportunities it offers – enabling increased resilience productivity and efficiency, and more importantly increased protection of the security of the business.  


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