The European Securities and Market Authority (ESMA) has issued a public statement to clarify its position regarding call taping under MiFID II.
The statement addresses issues regarding the applications by firms around the MiFID II requirements on the recording of telephone conversations.
ESMA reminds companies of the MiFID II requirements in this area.
Considering the exceptional circumstances created by the COVID-19 outbreak, some scenarios may emerge, where the recording of relevant conversations required by MiFID II may not be practicable, according to ESMA.
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If firms, under these exceptional scenarios, are unable to record voice communications, ESMA expects them to consider what alternative steps could be taken to mitigate the risks related to the lack of recording. This applies especially when market participants are reactivating their disaster recovery (DR) sites and or asking staff to work from home.
“Firms are expected to deploy all possible efforts to ensure that the above measures remain temporary and that recording of telephone conversations is restored as soon as possible,” ESMA said in its clarification.
In coordination with national authorities, ESMA continues to monitor developments in financial markets, including the application of relevant EU requirements by market participants, as a result of the COVID-19 situation and is prepared to use its powers to ensure financial stability, orderly functioning of EU markets and investor protection.
Black Swan event
Sources in the market that want to remain unnamed commented: “While DR sites should have full phone recording in place, whereas, let’s be honest, these have never been tested under real circumstances before and all more or less require some upgrading. And when working from home it’s tough to tape mobile phones, whereas our company is currently exploring ways to switch to internet backed telephone lines for the working from home scenario, which can easier be recorded and hence will be in compliance with MiFID II again. ESMA has done a great job here applying certain levels of flexibility in this Black Swan event.”