FSA set to remove mobile recording exemption

The Financial Services Authority (FSA) is poised to remove the mobile recording exemption that is currently in place, according to a consultation paper that the FSA will close by the end of this month.

The Financial Services Authority (FSA) is poised to remove the mobile recording exemption that is currently in place, according to a consultation paper that the FSA will close by the end of this month.

The omnipresence of BlackBerry and smartphones in general, and their massive market growth, are defining factors in the FSA's decision to reconsider its rules on the recording of calls and the current exemption that is applied to mobile phones.

Initially, the FSA issued a mobile recording exemption because of the technical challenges and high costs involved in implementing such recordings. However, with the advent and availability of new systems and technologies which would make it simpler for firms to capture and store mobile calls, the FSA is now reviewing the current mobile recording exemption, and published a consultation paper in March outlining such changes. The consultation period ends this month and many in the industry believe that the FSA will soon announce the removal of the mobile recording exemption.

Speaking at a BlackBerry/RIM event on the FSA's consultation paper, Robert Dempster, the EMEA Director of Enterprise Sales for Research In Motion (RIM), the creators of BlackBerry, said: "Advances in technology [mean that] our customers can easily integrate the voice recording solution from the mobile platform and at the same time reuse the existing technologies that they have already paid for and installed." 

The benefits of recording mobile calls

During discussions between BlackBerry, RIM, the FSA, and lawyers, the benefits of taped evidence that can be obtained from mobile phones were raised and the advantages, in terms of tackling market abuse and delivering greater price efficiency are visible and convincing.

According to Roger Tym, a partner at Hogan Lovells, a firm specialising in retail financial services law, taping mobile calls will give companies "a contemporaneous record of what actually happened in that conversation. So that must give firms a better position if they're, for example, dealing with their own claims or claims against them from counter parties or clients in terms of what actually happened leading up to and during the concluding of the investment agreement."

Mr. Trym added that lifting the mobile recording exemption could "help the regulator to find those cases of market abuse and deal with them effectively which is good for the firm and good for the market."

Talking about the benefits of recording mobile calls, and the changing face of the technological landscape, Mr. Dempster said: "I think large organisations [and] small organisations are now moving, transitioning away from just standard e-mail and voice on these devices to more complex solutions and voice recording is a fairly straight forward integration for our organisation with the help of ISP or independent software partners."

Issues to consider

The FSA is not entirely clear, however, on how exactly companies will introduce the mobile recording technology and this is one issue that is at the forefront of the current consultation period.

Jocelyn Macafferty, from the FSA's Investments Policy Department, said that the FSA will not be authoritarian about the technology that companies will have to use but, instead, will create a framework. "We haven't actually specified whether or not it has to be done centrally or hosted" she said, "so long as a firm can retrieve a record on our request, which is the demand that we make."

Another issue, raised by Stephen Hanks, Policy Manager for FSA, is that of companies existing internal rules and the ways in which these may need to be updated and adapted with the advent of new technology. "A lot of investment firms have banned the use of mobile phones on the trading floor, and even out to other areas" Mr. Hanks pointed out. "Whether they will remove that ban if we introduce the rule, I don't know - we'll have to wait and see. I suspect that they won't at first," he said.

The panel speaking at the BlackBerry/RIM event also discussed the potential problems that could be incurred by smaller firms, but Mr. Dempster said that "From a Blackberry perspective our platform is applicable for large and small companies alike."

Consultation paper's likely outcome

A decision is likely to be reached by the FSA soon, and many in the industry expect a lift on the mobile recording exemption to take effect by late 2011.

"Of course we're in a consultation period but we can see which way the wind is blowing" said Mr. Tym.

All that is really needed, said Mr. Tym, is a strong sense of equilibrium between the personal needs of those working within companies and the needs "of the regulator and the state to stop market abuse...or other evils."

"In terms of the rules that apply, obviously the FSA will be seeking to make rules that are proportionate to the end they're trying to achieve" Mr. Trym continued, concluding that "When we come to the difference between fixed and mobile in principle there's no difference. Of course you don't bring your personal fixed line into the office."

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