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Even with MiFID II implemented, many firms are still struggling with the extent of their responsibilities in order to comply with the updated legislation.
One particular aspect of the legislation that has proved difficult to interpret is Article 16, regarding recording electronic communications - the main confusion of which, is defining what "electronic communications" are.
A Summary of MiFID II, Article 16
Compared to its predecessor, Article 16 of the MiFID II Directive includes much stricter rules where electronic communications recording is concerned and what safeguarding firms will be required to undertake going forward:
Article 16(7) states:
"Records shall include the recording of telephone conversations or electronic communications relating to, at least, 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."
It goes on to say:
"Such telephone conversations and electronic communications shall also include those that are intended to result in transactions concluded when dealing on own account or in the provision of client order services that relate to the reception, transmission and execution of client orders, even if those conversations or communications do not result in the conclusion of such transactions or in the provision of client order services."
Firms will be required to keep a record of all communications that conclude in a sale or intended to result in a sale. In addition to this, firms will also be legally obliged to keep a record of these communications for up to seven years (dependant on local regulation requirements).
The complex and ambiguous nature of the Directive, as well as the scale of what is required, has resulted in much confusion in the industry. In this guide, we'll be looking at Article 16 and electronic communications in depth and provide more clarity on what firms need to be doing in order to comply.
In the rest of this guide:
- Find out what needs to be recorded under the umbrella of electronic communications
- Understand the most effective way of recording and retaining electronic communications
- See how this solution will help firms achieve compliance in accordance with the Directive