Following the global spread of COVID-19 public health concerns are having direct and significant impacts in the general economy. Radical actions have been and are further expected to be taken by national and local governments and authorities around the globe and the European Securities and Markets Authority (“ESMA”) is closely monitoring the situation in view of the continuing impact of the COVID-19 outbreak on financial markets in the European Union.
On 11 March 2020, ESMA issued a public statement where it clarified issues regarding the application by credit institutions and investment firms (“Firms”) of the MiFID II 1 requirements on the recording of telephone conversations.
In its public statement, ESMA reminds Firms that, under article 16(7) of MiFID II, they are required to record telephone conversations or electronic communications relating to transactions concluded when dealing on own account and those involving the provision of client order services that relate to the reception, transmission and execution of orders.
ESMA, however, also recognises that, considering the exceptional circumstances created by the COVID-19 outbreak, Firms are likely to face scenarios – for example, large number of Firms’ staff required to work remotely or the lack of access by clients to electronic communication tools - where the recording of relevant conversations required by MiFID II may not be practicable. If Firms, under these exceptional scenarios, are unable to record voice communications, ESMA expects them to look at alternative steps they could take to mitigate the risks related to the lack of recording.
These alternative steps may include, for example, the use of written minutes or notes of telephone conversations when providing services to clients. However, this is subject to Firms (i) informing the client beforehand that it is impossible to record the call and that written minutes of notes of the call will be taken and (ii) ensuring a more comprehensive analysis and monitoring of orders and transactions after their execution.
ESMA expects Firms to deploy all possible efforts to ensure that these measures remain temporary and that the recording of telephone conversations is restored as soon as possible.
A copy of ESMA public statement can be obtained here.
1. Directive 2014/65/EU of the European Parliament and of the Council and its implementing measures.
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