European UnionMiFID II
Officially MiFID II, Recording of Telephone Conversations and Electronic Communications
Directive 2014/65/EU, Art. 16(7); Commission Delegated Regulation (EU) 2017/565, Art. 76
In force since .
An interception and recording consent rule binding private bodies.
- Obligation class
- Disclosure, Governance, Retention
As of .
What it requires
- Directive 2014/65/EU is addressed to the Member States (Article 97), which had to adopt and publish the measures necessary to comply with it by and apply them from (Article 93(1), as amended by Directive (EU) 2016/1034), so you meet its rules through each Member State's transposing law. Commission Delegated Regulation (EU) 2017/565 is directly applicable and applies from the same date (Article 91).
- It reaches you if you are an investment firm, meaning a legal person whose regular occupation or business is the provision of one or more investment services to third parties and/or the performance of one or more investment activities on a professional basis (Article 4(1), point (1), of the Directive): record the telephone conversations and 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, including those intended to result in such transactions or services even if they do not (Article 16(7)).
- Take all reasonable steps to record the relevant telephone conversations and electronic communications made with, sent from or received by equipment you provide to an employee or contractor, or whose use by an employee or contractor you have accepted or permitted, and all reasonable steps to prevent an employee or contractor from making, sending or receiving relevant conversations and communications on privately-owned equipment you are unable to record or copy (Article 16(7)).
- Notify new and existing clients that telephone communications or conversations between you and your clients that result or may result in transactions will be recorded. The notification may be made once, before you provide investment services to the client (Article 16(7)).
- Before you provide services relating to the reception, transmission and execution of orders to a new or existing client, inform the client that conversations and communications are being recorded and that a copy of the recording will be available on request for five years and, where the competent authority requests, for up to seven years, in the same language or languages as you use to provide investment services to clients (Article 76(8)).
- Do not provide, by telephone, investment services and activities relating to the reception, transmission and execution of client orders to a client who has not been notified in advance about the recording of the client's telephone communications or conversations. A client may place orders through other channels, but those communications must be made in a durable medium such as mails, faxes, emails or documentation of client orders made at meetings (Article 16(7)).
- Record in a durable medium all relevant information related to relevant face-to-face conversations with clients, including at least the date and time of the meeting, its location, the identity of the attendees, the initiator of the meeting and relevant information about the client order including the price, volume, type of order and when it is to be transmitted or executed (Article 76(9)).
- Provide the records to the client involved upon request and keep them for five years and, where the competent authority requests, for up to seven years, counted from the date the record is created (Article 16(7) of the Directive and Article 76(11)).
- Store the records in a durable medium that allows them to be replayed or copied, retain them in a format that does not allow the original record to be altered or deleted, keep them readily accessible and available to clients on request, and ensure the quality, accuracy and completeness of the records of all telephone recordings and electronic communications (Article 76(10)).
- Establish, implement and maintain a written policy on recording telephone conversations and electronic communications, appropriate to the size and organization of the firm and the nature, scale and complexity of its business, which identifies the conversations and communications subject to recording and sets out the procedures to follow where exceptional circumstances leave you unable to record on devices you issued, accepted or permitted, with the evidence of those circumstances retained and accessible to competent authorities (Article 76(1)).
- Give the management body effective oversight and control over the recording policies and procedures, keep the arrangements technology-neutral and evaluate them periodically (adopting further measures at least when a new medium of communication is accepted or permitted), keep and regularly update a record of the individuals with firm devices or approved privately owned devices, train employees in the procedures, monitor the records of transactions and orders periodically on a risk-based and proportionate basis, and demonstrate the policies, procedures and management oversight to the competent authorities on request (Article 76(2) to (7)).
Who enforces it
Enforcement body
The competent authority each Member State designates under Article 67(1) of Directive 2014/65/EU, which Article 70(1) requires to be able to impose administrative sanctions and measures for infringements.
What this law does
Article 16(7) of Directive 2014/65/EU requires the records of an investment firm to 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.
Those telephone conversations and electronic communications include the ones intended to result in such transactions or services, even if they do not result in them. An investment firm must take all reasonable steps to record relevant telephone conversations and electronic communications made with, sent from or received by equipment the firm provides to an employee or contractor, or whose use by an employee or contractor the firm has accepted or permitted.
The firm must notify new and existing clients that telephone communications or conversations between the firm and its clients that result or may result in transactions will be recorded, and the notification may be made once, before the provision of investment services.
The firm may not provide, by telephone, investment services and activities relating to the reception, transmission and execution of client orders to a client who has not been notified in advance about the recording of the client's telephone communications or conversations. The records are provided to the client involved upon request and are kept for five years and, where requested by the competent authority, for up to seven years.
Article 76(1) of Commission Delegated Regulation (EU) 2017/565 requires an investment firm to establish, implement and maintain an effective written policy on recording telephone conversations and electronic communications, appropriate to the size and organization of the firm and the nature, scale and complexity of its business.
Article 76(8) of that Delegated Regulation requires the firm to inform the client, before providing services relating to the reception, transmission and execution of orders, that conversations and communications are being recorded and that a copy of the recording will be available on request for five years and, where requested by the competent authority, for up to seven years.
Article 76(9) requires the firm to record in a durable medium all relevant information related to relevant face-to-face conversations with clients, including at least the date and time, the location, the attendees, the initiator and relevant information about the client order. Article 76(10) requires records to be stored in a durable medium that allows them to be replayed or copied and to be retained in a format that does not allow the original record to be altered or deleted.
Article 4(1), point (1), of Directive 2014/65/EU defines an investment firm as any legal person whose regular occupation or business is the provision of one or more investment services to third parties and/or the performance of one or more investment activities on a professional basis. Article 93(1) of Directive 2014/65/EU, as originally adopted, required Member States to apply the measures transposing it from .
Article 1, point (7), of Directive (EU) 2016/1034 replaced the date in Article 93(1) of Directive 2014/65/EU with . Article 91 of the Delegated Regulation applies that Regulation from the date that appears first in the second subparagraph of Article 93(1) of Directive 2014/65/EU.
Article 70(1) of Directive 2014/65/EU requires Member States to ensure that their competent authorities may impose administrative sanctions and measures that are effective, proportionate and dissuasive for infringements of the Directive. Article 70(3), point (a)(iv), lists Article 16(1) to (11) among the provisions whose infringement Member States must regard as an infringement of the Directive.
When LexLint raises it
When your app profile says your app records conversations, processes voice recordings or provides financial services.