Shearman & Sterling LLP | FinReg | COVID-19: European Securities and Markets Authority Clarifies MiFID II Telephone Recording Requirements
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  • COVID-19: European Securities and Markets Authority Clarifies MiFID II Telephone Recording Requirements
    03/20/2020
    The European Securities and Markets Authority has published a statement on the telephone recording obligations in the Markets in Financial Instruments Directive. MiFID II requires records to be kept of all services, activities and transactions undertaken by an investment firm, including recordings of telephone conversations or electronic communications relating to: (i) transactions concluded when a firm deals on own account (proprietary trading); and (ii) the provision of client order services that relate to the reception, transmission and execution of client orders. Firms are also required to implement and maintain a policy for the recording of these telephone conversations.

    ESMA's statement recognizes that the COVID-19 pandemic may create exceptional circumstances where it is not practicable for firms to comply with the telephone recording requirements, for example related to remote working. ESMA states that where a firm is unable to record calls, as required by MiFID II, alternative steps should be put in place to mitigate the risk posed by the lack of the recording. Such alternatives must be temporary and firms are expected to reinstate telephone recording as soon as possible. ESMA suggests the use of written minutes or notes of telephone conversations when providing services to clients. However, ESMA states that certain conditions must still be met, such as prior information being provided to the client of the impossibility to record the call and that written minutes or notes of the call will be taken instead. Firms must also ensure enhanced monitoring and ex-post review of relevant orders and transactions. 

    View ESMA's statement.

    Details of other regulatory responses to COVID-19 are available at our COVID-19 Research Center.

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    TOPICS: COVID-19MiFID II