New rules for telephone recording

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LONDON – Getting a jump on European regulation, the UK Financial Services Authority (FSA) has issued new rules requiring firms to record telephone conversations and other electronic communications about client orders and the conclusion of transactions in the equity, bond and derivatives markets. The new rules will come into force from March 2009.

The FSA consulted on the taping rules last year in chapter 19 of the Conduct of Business regime: Non-Mifid deferred matters. The responses received have resulted in the final rule changing significantly from the original proposals. The retention period for recorded calls and communications has been reduced from the original proposal of three years to six months and mobile phone conversations have been exempted from the taping rules but this will be reviewed in 18 months’ time. In addition, discretionary investment managers will not be required to record telephone conversations and electronic communications with firms that are subject to the taping rules.

This is one more compliance headache for firms still struggling to get to grips with the new Markets in Financial Instruments Directive and one that will result in substantial incremental costs for small to medium-sized firms in particular that may not have recording systems already installed.

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