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Setting clear policies for how financial services companies communicate with their customers is vital

Setting clear policies for how financial services companies communicate with their customers is vital

A comprehensive compliance policy is paramount for ensuring that financial advisors and brokers use the right – approved – channels for communicating with customers is essential to meet compliance obligations.

Ensuring that financial advisors and brokers use the approved channels for communicating with customers is essential to meet compliance obligations. It means a comprehensive compliance policy is paramount.

In February this year, the U.S. Securities and Exchange Commission announced charges against 16 financial services firms, including broker-dealers and investment advisers, amounting to $81 million in fines for “widespread and longstanding failures” by the companies and their employees to maintain and preserve electronic communications[1].

A comprehensive review of compliance policies and procedures is essential

The SEC found “pervasive and longstanding uses of unapproved communication methods” known as off-channel communications, at all 16 firms. The broker dealer firms agreed that between 2019 and 2020 their employees communicated through personal text messages, while investment adviser firms admitted their employees sent and received off-channel communications related to “recommendations made or proposed to be made and advice given or proposed to be given”.

Additionally, messages were not stored which left gaps in the audit process and therefore in the firms’ compliance obligations. The firms were told to “conduct comprehensive reviews of their policies and procedures relating to the retention of electronic communications found on personal devices and their respective frameworks for addressing non-compliance by their employees with those policies and procedures.”  

Of course, the implications of such compliance failures are similar in Europe – under MiFID and MiFID II. MiFID II requires that all relevant communications between broker and customer, across all channels, must be recorded.

In fact, the guidelines are clear: all calls/conversation that will or may result in a transaction must be recorded, the customer must be notified that the call is being recorded, and the file of the call or conversation must be securely stored for 5 years, which in some circumstances may increase to 7 years.

MiFID II requires a knowledge of all customer touch points

This poses a significant challenge for financial services firms. Consider a typical customer journey for a transaction. The initial contact may be an advert on social media or an online event regarding financial services being offered. For those interested, this may be followed up with an email or mobile phone call, or several. It means that compliance must cover every customer touch point across different communications channels – which the U.S. firms failed to ensure.

Therefore, companies need a comprehensive, company-wide compliance policy, with clear-cut guidelines for all employees. The MiFID II legislation even states that organisations—typically through their compliance officers—must have a clear understanding of all the channels used by employees to ensure that everyone is using only using the channels permitted in the compliance policy and therefore all relevant conversations are recorded and stored.

It’s also vital that the company’s compliance policy is clearly communicated to all employees, and followed up regularly to ensure that they are adhering to the guidelines and only using the appropriate channels. Of course, there is also a requirement that some calls are not recorded, such as private calls. This can be ensured by using whitelisting, whereby calls from specific numbers are not recorded. As becomes clear, any compliance policy must be meticulously implemented and regularly reviewed.

The task of ensuring all of this, of course, is not possible manually. That’s where a service such as Touch Call Recording Service can carry most of the burden by fully automating compliance call recording.

Touch Call Recording Service for ensuring compliance

Touch Call Recording Service is a complete managed service for compliance recording that covers over 50 channels, including fixed and mobile calls, SMS, chat, PBXs, collaboration tools such as MS Teams, financial services apps including Bloomberg Chat and LSEG Messenger (the new name for Refinitiv Eikon), to name just a few.

It’s network based so there is no need for software or hardware deployments, and employees can be on-boarded quickly and easy, with customisation of channels and whitelisted numbers.

On completion of each call, the recording is available via an intuitive and user-friendly Web-Portal. All necessary IT security features are included in the service.

Getting your compliance policy right is vital, and Touch Call Recording Service can help to ensure that its implemented perfectly. To find out more, contact us today.




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