Call Center Compliance: MiFID II

Howard Schulman

Businesses that operate in the financial industry are keenly aware of the seemingly endless documentation, signatures, consent and evidence that need to be managed for financial transactions. Financial institutions are faced with stringent regulations and often struggle to comply to avoid strict penalties.

Any consultations with potential customers or discussions leading to a transaction must be recorded, archived and easily retrieved, often for periods as long as five years or more. Doing so in a transparent and streamlined manner still represents one of the major challenges facing financial institutions and trading floors.

MiFID History
The original MiFID was created in 2004, prior to the 2008 global financial crisis. Ad hoc revisions were made by individual countries to address issues that resulted from the crisis. These issues are now addressed through an initiative called MiFID II, which harmonizes the rules for all firms with EU clients, across all countries.

Specifically, effective January 3, 2018, the Markets in Financial Instruments Directive II (MiFID II) replaced the original directive that had been in force since November of 2007. The MiFID II applies to companies involved in financial dealings in order to make European markets safer and more efficient.

The primary goals of the MiFID II include:

  • Protection of customers
  • More governance of financial products
  • Unbundling of advice from the sale of financial instruments
  • Broader scope of supervision to include equity and non-equity trading
  • “All sufficient steps” position to ensure execution of transactions with customer interests priority
  • An increase in transaction data and reporting requirements

The MiFID II forces financial institutions to invest in defining their governance processes for recording systems, and to adapt their recording approach to ensure specific details are recorded per the regulations. Those enterprises that largely focus their compliance efforts on voice recording will now have to accept a more complex compliance reality, and expand and apply their voice recording practices across all digital channels.

Call centers should take particular note of formal scripts, consent and signature requirements as these are core to the disclosure of financial transactions and are immediately pertinent to MFID II. In step with that, it’s important that associated documentation is stored in a compliant fashion for quality control and auditing.

call center compliance

MiFID II compliance requirements in call centers

  1. Document: Record all calls which will/may result in transactions. All electronic communications that are intended to lead to a transaction must now to be recorded. It is important to consider the wide variety of channels that fall under the term electronic communications At a basic level, organizations will have to ensure that their recording infrastructure is capable of capturing chat, fax, emails, SMS and IM as well as voice interactions and mobile calls.
  2. Notify: Notify the customer that the conversation is being recorded.
  3. Store: Store all communications for a minimum of 5 years, and where requested by the competent authority, for a period of up to seven years. By extending the retention period, the regulation requires that firms make space for more storage and effective information retrieval.
  4. Retrieve upon request: Reproduce quickly and easily all communications leading up to a specific transaction or in a given time period.
  5. Monitor effectiveness. Organizations need to monitor the effectiveness of their trading communication recording process. They must also be aware of periods when they do not comply, and investigate all issues to understand why the records were not retained. Records of the investigation itself should be kept for the same duration as the original record retention period.

System testing is critical to ensure protection for both the call center and the customer. “Under MiFID II business-as-usual ways of performing this testing are no longer going to work,” said Chris Wooten, Executive Vice President, NICE. “In addition to increasing the number of regulated users who need to be recorded, MiFID is raising the regulatory hurdle for FSOs by requiring complete transparency and accountability.

It’s no longer sufficient simply to have systems in place that enable conversations to be conducted, recorded and retained; FSOs need to ensure those systems are fully operational and all working together as planned, and provide evidence around the auditing process and results.”

How To Drive Business and Avoid Non-Compliance
Avoiding penalties and fines related to compliance issues is a substantial effort for call center leaders but there are some tactics which will help make the job a little easier.

  • Conduct periodic agent training
  • Focus on laws and regulations affecting your industry
  • Provide scripts to keep agents compliant – digitize scripts and workflows for 100% adherence
  • Police agent areas to make sure customer information is secure
  • Enforce encryption of personal information
  • Maintain a digital and auditable trail of interactions, documents and signatures
  • Utilize technology that makes compliance easier for customers and agents

call center compliance

Call center Compliance