As you will know, the obligation to record telephone conversations and electronic communications (as set out in COBS 11.8) does not currently extend to “telephone conversations and electronic communications (except emails) made with, sent from or received on a mobile telephone or other mobile handheld electronic communication device”. The exclusion was primarily based upon concerns that the then technology was not sufficiently developed to be able to capture such communications.
The FSA has published CP10/7 – “Taping: Removing the mobile phone exemption” – in which, as the title suggests, it is proposed to remove this exemption. It’s interesting to note from the paper that whilst the FSA surveyed 675 randomly selected firms, only 110 firms responded and of those 18 were scrubbed for not providing key information. However based upon the survey, with the additional benefit of an independently commissioned consultation, the paper assumes that after allowing for those firms putting a ban on their use, around 16,000 mobile phones will be affected by the new rules. Although there are differences in the estimated costs between the FSA survey and the separate consultation, the former shows an average one-off cost per user of £700 and on-going costs of £1,200 p.a.
The table on page 7 of the CP provides a handy reminder of the scope of the proposed application of the rules.
For the avoidance of doubt, the exemption available to a discretionary investment manager (COBS 11.8.6(2)) remains (as well as the ‘infrequent basis’ rule). However do bear in mind that this is an FSA rule and not an obligatory EU-wide rule. As such, any discretionary investment manager hoping to take advantage of the exemption cannot assume that non-UK investment firms are subject to a recording obligation.
Note from the draft rules that whilst the recording obligation relates to equipment provided by or permitted by a firm, a new rule will be inserted to oblige a firm to prevent the use of private electronic equipment which the firm is unable to record or copy.
The consultation period ends 14 June. Should the proposals go ahead then the new rules should come into force in Q4 2010, subject to a transitional period of around a year.
