The FSA has released PS10/17 – “Taping of mobile phones”, being feedback on CP10/7 (see Regulatory Roundup 11) together with the final rules.
As you will know, COBS 11.8 concerns recording telephone conversations and electronic communications in respect of any activities falling within those set out in COBS 11.8.1. By virtue of COBS 11.8.6(1), the recording obligation does not apply to telephone conversations and electronic communications (except emails) sent from or received on a mobile telephone or other mobile handheld electronic communication device. This exemption will be removed in its entirety.
A new rule – COBS 11.8.5A – will be inserted to require a firm to take reasonable steps to prevent an employee making or receiving relevant telephone conversations and communications on privately-owned equipment which the firm is unable to record or copy.
The FSA will not be prescriptive about what constitutes ‘reasonable steps’ but e.g. section 2.26 of PS10/17 quotes some examples which “.. appear sensible …”.Section 2.30 advises that the FSA would expect firms to make employees aware of the requirements, ” … for example through adequate compliance training…”. The regulator would also expect trails to be in place so that firms are alerted to any relevant conversations that have occurred off taped lines. Section 2.45 covers the situation when an employee is working from home or operating out of an office in the EU on behalf of a UK based firm (including EU or third-country firms with branches in the UK).
The exemption available to discretionary investment managers remains provided that the requirements in COBS 11.8.6(2) & (3) are met.
A reminder to firms that the mobile phone recording obligation is an FSA requirement and not a MiFID/EU requirement. As a result the discretionary manager exemption in COBS 11.8.6(2) would only be available if the ‘other firm’ is also subject to COBS 11.8.5.
Firms that are affected have a year to consider how best to comply with the new rules; the changes are effective from 14 November 2011.
The Annex to Appendix 1 of PS10/17 contains the revised rules.
