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FinTech Trends Newsletter Week 11th September – 15th September 2017
MiFID II RegTech: the essential combination of regulation, compliance and technology
With the July 2017 publication of its MiFID II Policy Statement, the Financial Conduct Authority (FCA) has signalled the final countdown to the most sweep- ing changes of governance, protection and transparency for a generation.
While MiFID II will fundamentally change the business models of many firms, especially those in the advisory sector (buy side), there are also significant new technology requirements that apply to all firms and which are causing some to have sleepless nights.
One of these new technology decrees is a mandate to record telephone calls for anyone either directly involved in trading or giving advice that may lead up to a trade. The intent behind this is noble, which is to provide transparen- cy against firms or individuals giving bad advice. However, the new regulations don’t end simply with the need to record these calls, but go further to require that firms actively monitor their calls to identify mis-selling or other bad practices.
With many firms conducting much of their business over the phone, it begs the question as to how, and who, are going to be reviewing these calls and just how many phone calls need to be listened to in order to satisfy the regu- lator that the compliance oversight function is operating as it should.
Should firms plan to listen to all calls, 1% of calls or somewhere in-between? Estimating this and being on the wrong side of the line, can make the difference between compliance & non-compliance & all the personal & corporate implications of this. However, while the advice from the regulator may be vague, in practice the regulator is usually very prescriptive regarding whether a firm has adequate or inadequate controls in place. Call recording and review is no exception. In a review of the Final Judgements that the FCA has made on firms who do record their telephone calls, it appears that over the past five years the FCA expect firms to listen to around 20% of their recorded calls. Whilst this may seem a reasonable degree of sampling from a purely statistical point of view, in the context of a firm that conducts much of its business on the phone, this requirement to eavesdrop to this level could place an onerous burden on the firm.
MiFID II Call Recording ompliant Solutions
Fortunately, there is new cloud-based technology, that Storm IT Financial utilises, making the recording & storage of calls (Keeping client records for 5 years & regulators 7 years) much simpler than it has been in the past, technology can also play an important part in reducing the compliance monitoring burden too. A new type of artificial intelligence (AI) technology is at hand that should enable firms to meet the new MiFID requirements without the need to hire armies of compliance staff. As such, individual compliance officers can review the conversations of thousands of staff at the same time, with only the need to listen to those which warrant their attention.
Whilst automated transcriptions of calls will never reach 100% accuracy, what this “AI / robot compliance monitoring” can deliver is very rapid turnaround, reasonable accuracy and 100% coverage. After all, isn’t it preferable that firms can have automated compliance monitoring on 100% calls with an 80% accuracy than have humans listen to only 20% of calls with accuracy that, over time and after a long day, may not be as accurate as one would like to think.
With London consolidating its position as the fintech centre of the world, it’s no surprise then than it is London-based firms that are leading the charge in applying call recording and AI to these new regulation and compliance challenges. Just as London tech firms pioneered solutions to the FCA’s original mobile call recording requirements in 2014, so too are London firms applying call recording and AI technology to the compliance monitoring challenges that such recordings now present.
Storm IT Financial can help guide, prepare & advise firms on IT, technology, communication so you can deal with the regulatory & compliance burdens now required by the FCA, MiFID II & GDPR. If you’d like more details on communications, voice call recording, data management, disaster recovery, back up, cybersecurity, regulatory & compliance technology and managed solutions for your alternative investment, hedge fund, wealth manager and private equity firm, please contact Storm IT Financial for more information.
Storm IT Financial FinTech News & Trends picks: Week 11th September – 15th September 2017
Protecting applications and data on Azure
Azure Backup and restore virtual machine applications:
https://azure.microsoft.com/en-us/blog/protecting-applications-and-data-on-azure-stack/
94% of people in financial services suspect colleagues are bluffing about their fintech knowledge
Study finds so-called “FinTech experts” may not be as knowledgeable as they claim:
ING moves into digital wealth management with Scalable Capital
ING in Germany is to roll out a digital wealth management service in a pilot project with robo-advisory start up Scalable Capital:
Wealth managers begin to outsource in drive to cut costs
Private banks & wealth managers are outsourcing their back-office func- tions due to squeezed operating margins and rising compliance costs:
https://www.ft.com/content/0584a52a-897a-11e7-bf50-e1c239b45787
One third of big firms struggling with Mifid II deadline, survey finds
Larger asset managers are facing a tougher task in attaining Mifid II com- pliance by the January 3 deadline than their smaller competitors:
JPMorgan backing technology to transform trading desks
As trading revenues plunge at bulge bracket investment banks, JPMorgan Chase & Co. is putting its faith in technology to drive growth:
SteelEye partners with Anchor Group to bring MiFID II solution to Swiss market
SteelEye, a compliance technology and data analytics firm, has partnered with specialist Swiss financial firm, Anchor Group, to bring its MIFiD II cloud-based solution to the Swiss markets:
We must not let regulation crush innovation
Regulatory burden on banks & financial firms increases as does tech solutions to help address such demand:
AI’s threat to traditional banking models
AI, machine learning, and the Internet of Things are now defining the future of our economy:
UK proposes exemptions to Data Protection Bill
Financial firms could receive special exemptions from new laws to protect personal data, the gov’t has said:
http://www.bbc.co.uk/news/business-41261538
Data May Be The Last Best Hope to Beat Index Trend
Stock pickers say alternative data can create excess returns….:
Tradeweb APA authorised for MiFID II trade reporting
The Tradeweb APA received authorisation from the UK’s Financial Conduct Authority (FCA), effective from 3rd January, 2018.
https://www.finextra.com/pressarticle/70457/tradeweb-apa-authorised-for-mifid-ii-trade-reporting
