7 Ways to Comply with MiFID II: from Recordkeeping to Monitoring

Find out how to ensure holistic communication compliance under the new Markets In Financial Instruments Directive.

A new regulatory landscape

Replacing the first iteration of the regulations enacted in 2007, MiFID II will change many aspects of the legislation. Effective from January 3rd, 2018, the new requirements aim at creating a regulated, transparent and accountable financial atmosphere within the EU.

The legislation provides a legislative framework to ensure that financial products are traded on regulated venues, increase transparency of trading, limit speculation on commodities and protect investors through very strict organizational and conduct-of-business requirements. All of this and more,  to strengthen market integrity, reduce risk and foster stability in the financial markets.

Ensuring your MiFID II readiness

Verint Verba offers reliable and fully scalable solutions that help you comply with MiFID II, from communication capture and storage to real-time monitoring and assurance.

The Verint Verba enterprise collaboration compliance platform enables your business to capture a wider set of communications, for more regulated users, across more modalities, and provide proof of compliance that they are doing so.

They also will need to monitor for all types of market abuse – whether intended or actual. Verint Verba will help your organization to address this complex regulatory framework.

At a Glance

Recording obligations under MiFID II

Capture and store your
communications

Including voice calls and electronic communications

Provide rapid access to
records upon request

To reconstruct any financial trade and transaction

Retain interactions for
at least 5 years

With a tamper-proof, secure archiving solution

Find out how Verint Verba future-proofs
your MiFID II compliance

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Voice is not enough

MiFID II, Article 16(7):
“Records shall 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.”

Basic recording of phone calls is no longer enough. You must capture all communications channels. Besides, the Directive does not clearly define “electronic communication”, however, the lawmakers make a deliberate attempt to ensure that evolving and developing future technologies are also regulated under MiFID II. We have good news, Verint Verba future-proofs your UC compliance by constantly expanding our recording portfolio with the latest UC service providers, mobile networks and other cloud communication services.

Verint Verba offers proven communications capture for Cisco, Skype for Business and other leading communication solutions. Text, voice, video, desktop screen, screen and content sharing, and records of other communication modes can be recorded, stored, retained and managed with a single platform.

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Intent of transaction matters

MiFID II, Article 16(7) continued:
“Such telephone conversations and electronic communications shall also include those that are intended to result in transactions concluded when dealing on own account or in the provision of client order services that relate to the reception, transmission and execution of client orders, even if those conversations or communications do not result in the conclusion of such transactions or in the provision of client order services.”

In the first iteration of the policy, calls only had to be recorded when the trade was executed. The wording “intended to result” spans a significantly wider scope of interactions. Your business has to be prepared to capture a lot more conversations than before. With a server-side, tamper-proof, high-performance recording solution like Verint Verba, you can record all conversations regardless of the outcome.

Using built-in speech analytics, you can build rules that help automatically sense and recognize the intent of a potential market abuse or insider trading. Our speech search engine can automatically detect flagged phrases in a conversation and notify administrators in real-time while automatic labeling allows to seamlessly categorize and share labeled conversations across your compliance team. Additionally, the speech-to-text AI module can provide a transcript and apply text analytics at lightning speed, thus easing your electronic discovery efforts.

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Reasonable steps to record

MiFID II, Article 16(7) continued:
“… an investment firm shall take all reasonable steps to record relevant telephone conversations and electronic communications, made with, sent from or received by equipment provided by the investment firm to an employee or contractor or the use of which by an employee or contractor has been accepted or permitted by the investment firm. An investment firm shall take all reasonable steps to prevent an employee or contractor from making, sending or receiving relevant telephone conversations and electronic communications on privately-owned equipment which the investment firm is unable to record or copy.”

“Reasonable steps” is the important phrase. The regulator will look at efforts, not necessarily the exact technical solution. Investment firms, credit institutions, trading floors and corporate finance companies face the challenge of recording mobile calls, landline calls, and instant messages, whilst providing efficient additional communication solutions to all regulated users.

With Verint Verba and through our partnerships with public mobile network providers, you can record mobile traffic, reliably from the network. In cases where network-based recording is not available, mobile apps can also help solve this requirement.

You can also use enterprise communication solutions like Cisco Jabber or Skype for Business. When deployed correctly, these tools will allow communications outside your firm on a wide range of networks, all recorded, captured, retained and archived securely by Verint Verba.

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Notify participants

MiFID II, Article 16(7) continued:
“An investment firm shall notify new and existing clients that telephone communications or conversations between the investment firm and its clients that result or may result in transactions will be recorded.”

This is a basic requirement that sounds simple, but still complex to tackle in most communication environments. Voice announcements should work both on inbound and outbound PSTN and federated calls. Notifying participants that the conversation may be recorded is also a requirement during conference calls. Applying proper legal disclaimers in instant messaging is no exception.

All these scenarios are covered by your Verint Verba solution, where voice announcements, notifications and IM disclaimers are core capabilities of our platform. Verint Verba Regulate and Verint Verba Archive bring you the ability to notify your clients upfront that the conversation will be recorded and retained, to help your business limit liability and meet MiFID II standards.

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Assessing recording procedures

ESMA Questions & Answers on MiFID II (ESMA35-43-349)
"In determining the firm's approach to monitoring the recording requirements, which includes the frequency and scope of such monitoring, ESMA expects firms to put in place arrangements which are appropriate to the nature, size and complexity of its business. [...] The monitoring should be conducted regularly and when necessary on an ad-hoc basis. [...] The monitoring should at least aim at: assessing compliance with recording procedures in place, assessing the adequacy of such procedures, ensuring that the records are readily accessible, and ensuring that the records accurately reconstruct the audit trail of a transaction."

Under MiFID II, firms will need to review their recordings from time to time to ensure compliance. Regular and ad-hoc assessment of recording procedures and of the adequacy of such mechanisms in place will be a basic requirement. Your business must provide proof that all relevant communications are captured and are readily accessible to accurately reconstruct the audit trail of a financial transaction.

By using automated Conversation Detail Records (CDR) reconciliation, Verint Verba provides your business with a reliable way of assuring that all recordable conversations have been captured correctly. Apply scheduled, automated or manual recording assurance mechanisms to verify that your recording process is working flawlessly, and to verify that all regulated users are recorded across multiple communication modes and modalities.

Coupled with the fine-grained voice quality assurance functionalities of Verint Verba Assure, financial institutions can provide proof that relevant recordings are being captured while avoiding network bottlenecks and processing anomalies.

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Durable medium

MiFID II, Article 4(63):
“durable medium" means any instrument which: (a) enables a client to store information addressed personally to that client in a way accessible for future reference and for a period of time adequate for the purposes of the information; and (b) allows the unchanged reproduction of the information stored.”
MiFID II, Article 16(7):
"The records kept in accordance with this paragraph shall be provided to the client involved upon request and shall be kept for a period of five years and, where requested by the competent authority, for a period of up to seven years."

MiFID II states that businesses must ensure the quality, accuracy and completeness of their recordings and these must be stored in a medium that is accessible and readily available to the Financial Authorities upon request.

Your Verint Verba solution can encrypt and digitally sign conversations at the place of recording and directly store them in a compliant storage. Our open framework integrates with a range of WORM (Write Once Read Many) data stores and external storage targets, that further ensure your recorded conversations will not be manipulated, tampered with or deleted. The built-in compliance export and legal hold (the ability to suspend deletion policies on specific conversations) makes sure you can efficiently comply with regulatory requests.

Using Verint Verba, recordings can be easily configured to be securely stored to meet the record-keeping requirements defined by the regulators. Your compliance teams and administrators can leverage our sophisticated storage policy framework for defining flexible rules for data retention and control the recorded data lifecycle in the system.

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Retrieve upon request

MiFID II, Article 31(3):
"Member States shall also require investment firms and market operators operating an MTF or an OTF to also supply without undue delay the information [...] to the authority competent for the investigation and prosecution of market abuse and to provide full assistance to the latter in investigating and prosecuting market abuse occurring on or through its systems."

Member States’ competent authorities can request information from an investment firm relating to any set of transactions. According to MiFID II, these requests must be fulfilled and executed in a timely manner. Speech AI and rule-based automated analytics will accelerate your electronic discovery and the production of structured information. Spot any keyword or phrase in any conversation by using phonetic indexing and improve the accuracy of your search by leveraging the integrated machine learning capabilities of our speech transcription feature. Verint Verba goes that extra mile to help you produce data at a moment’s notice.

Apply our built-in advanced compliance mechanisms to streamline, accelerate and secure the way your team collaborates on cases, runs compliance analysis and performs e-discovery. Do the authorities request comprehensive and audited data sets and e-discovery packages? Verint Verba helps your teams easily export recorded conversations for rapid data analysis, collaborate on compliance cases and manage approval workflows in an agile way.

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