MIFID II; KEEP CALM, COMPLIANT AND IN THE CLOUD

By Ralph Awad, Director of Cloud Operations, Calabrio

After seven years in the making, the Markets in Financial Instruments Directive II is here. By January of 2018, financial institutions must prove that they have acted honestly and in accordance with client wishes, which means recording and storing every interaction that leads to a trade.Put simply, regardless of the original intent of the call, if any conversation evolves into a trade, the entire interaction must be recorded and stored.All recorded conversations must be stored for five years with the captured files searchable to the extent any record can be sourced and analysed immediately upon request.

Ensuring compliance with these regulations for every conversation, and across every channel, is no small feat. According to an estimate from EY Advisory, a typical medium-sized UK wealth manager is spending between £3m to £5m to get ready for MiFID II. As the January deadline looms and pressures and costs continue to rise, companies are scrambling to prepare for what will be a massive change.

Out of the fog of requirements and regulations comes the cloud with an easier path to compliance.

Feasibility

MiFID II was created to ensure legal and ethical trading practices, but with that legislation comes the reality that more than 300,000 employees in the UK alone will fall under MiFID regulation. Companies will have to dedicate a substantial amount of time to govern communication on company-issued devices, as well as applications loaded to personal devices, which may ultimately lead to policies that prohibit the use of personal devices when conducting official business.

The sheer breadth of channels and devices makes it extremely difficult for companies to capture every conversation, and the difficulty lies in the fact that the conversations to worry about are most likely not taking place over recorded channels.For MiFID to work, companies must perform due diligence to identify those employees who fall off the radar, and this is where analytics become critical.

New analytics technologies have the power to track not only what and how something is said in recorded conversations, but the technology can also identify conversation gaps and what’s not recorded. For instance, if there are no recorded calls from an employee in two or three days, alerts can be sent to management so they can dig deeper. Perhaps the employee was on holiday, or maybe the employee had some not-so-upstanding reasons for switching to non-recorded lines.

The Legacy Approach

The outlook may sound bleak, but the finance sector does have available options to ensure compliance, even when calls might happen outside of recorded channels.

The first option is to upgrade legacy solutions. However, this will require additional hardware installation, expert personnel, software licenses and the hardware itself, which can be a costly and ongoing proposition. The average lifespan of hardware is three to five years, and then the cycle starts again.

In addition, given the sensitive nature of the industry, privacy and confidentiality when recording calls is imperative, and legacy, on-premises solutions are no more secure than their cloud counterparts. Equally, legacy solutions are not equipped with smart searching, making it nearly impossible to locate specific call information.

Putting Hope in the Cloud

Legacy solutions can be cumbersome and, given the nature of compliance needs and fast-approaching deadlines, cloud providers have an enticing proposition for the industry. The cloud not only provides a scalable amount of storage and reduced cost of IT labour, it also provides a secure method for recording and storing confidential calls.

Typical cloud deployments are faster than on-premises legacy solutions, and updates and upgrades are performed much faster, which gives institutions access to the newest technology to ensure utmost compliance. From a cost standpoint, the cloud is rooted in utility-based billing, which is often more economic than constantly upgrading both internal hardware and software.

Not only that, when speech and text analytics are deployed via cloud solutions, search capabilities are available at anytime and anywhere, all over an intuitive user interface. In addition to searching abilities being much faster and more robust, users also no longer have to wait until they are onsite to search for and examine calls, which allows companies to take action faster if something suspicious arises.

Up, Up and Away

The cloud offers a flexible, scalable, and cost-effective solution for financial institutions looking to hedge against potential compliance issues when the new MiFID regulations take effect. Between phone, email, SMS, and in-person communication, the finance sector has enough to worry about before January. But, with the help of the cloud, they can focus on implementing the right internal processes to ensure that their customers are getting the best, most ethical service from every single employee.

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