FSA mobile regulations - the key challenges for financial services firms

14 November 2011

Telephone calls and electronic messages have been the focus of scrutiny from the Financial Services Authority (FSA) since March 2009 - but these regulations are now due to see a significant change.

The FSA’s phone recording rules will be updated on Monday 14 November to include all interactions conducted on mobile, which was exempt from the original legislation. At the time, the FSA felt that the technology required to monitor the calls of executives was not yet advanced enough to support the myriad banks in the sector.

However, last year after a consultation period, the FSA decided to reconsider its original decision. Technology was thought to be up to speed while the regulator was also under extra pressure to prevent market abuse following the financial crash in 2008.

Ian Hook, vice-president of Marketing at Compliant Phones, an IT vendor specialising working with banks to help them comply with the changes, said that the 14 November update is an indication of how the march of technology is shaping the corporate world.

“Although trading is still largely dealer-based because of the desk boards and the compliance systems which support it, the reality is that behaviours are changing very rapidly due to the power of smartphones and mobile technology,” he explained.

“Traders no longer have to work from their desk and providing they are compliant, which is where the recording comes in, they can now work anywhere.”

Despite the deadline, recent research published by Orange Business UK, suggested that many financial firms are unaware of what they need to do to comply with the regulation.

The report showed that only 16 per cent of respondents were aware of the regulation and when it comes into effect. Nearly a third of participants confessed to having no knowledge at all of the FSA’s intentions.

Curtis Nash, chief executive officer (CEO) at Compliant Phones, said there has been a great reluctance within the industry to embrace the incoming legislation.

“None of the traders have wanted to have all their calls recorded with many of them resisting as long as they can. Now many of them have left it too late.”

So with many organisations either unaware of what the regulations mean or still looking to implement the changes to monitoring practices, banks and technology vendors face numerous challenges to comply. Ian Hook highlighted the key issues;

• All calls regardless of network or location need to be recorded

Hook said: “A trader can be regulated by the FSA but when working abroad in another office and using the phone, they are still under the FSA’s jurisdiction. These calls still need to be captured and stored.”

• The integrity of every recording needs to be guaranteed

“The mobile recording space is littered with legacy services which have evolved with different types of technology. In the past organisations were able to record voice onto your handset. Some organisations have used that and tried (unsuccessfully) to apply it to the legislation.”

• All relevant interactions on a handset need to be captured

Nash said: “FSA regulation says all relevant conversations need to be captured. So if the company allows Facebook or Twitter we need to record it. The legislation refers to all interactions happening on the handset.”

• Data management

Hook: “Once you’ve captured the data, you need to be able to use it in a meaningful way. From a compliance perspective this means being able to search through the data for relevant streams and get that information in good prompt time either to support the regulator or to support your internal governance. “

By Jim Ottewill

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