The deadline for enforcement may not be written in stone, but the countdown for MiFID II is on. As part of the new regulations, enterprises need to ensure that all records relating to client orders are archived. The emphasis now is on content, not channel and that means all communications, not just email but social media too, needs to be captured. It might be tempting to simplify the issue by archiving data once or twice a day, in the same way you’ve been handling email for years. But there are several reasons why you should reconsider this MiFID archiving approach.
The problem is that email is a relatively static form of communication when compared to the real-time applications of today’s business environment—social media, collaboration tools and instant messaging. And rarely are they used in isolation.
A conversation might revolve around a phone call on skype, but users will typically share additional information over chat, forward emails relating to the topic, and even send a message out on social if it’s good news. Just to add to the complexity, they might not be discussing one trade, but potentially several.
When months later you need to produce a breakdown of what was said by whom, over what channel, and in what order, it’s easy to see that a simple archive doesn’t cut it anymore.
A single snapshot of your data doesn’t actually tell you very much. Like a picture taken with a 1970s Polaroid camera, it tells you that everyone is happy at that particular moment. It doesn’t tell the true story that two minutes before the kids were arguing as to who was responsible for Barbie sporting a brand new moustache. All that is wiped away by the toothy smiles in the captured image.
The same can be true of archives not made in real-time. It doesn’t tell you that the trader bending the rules slightly makes sure all his electronic communications relating to it are deleted before the system runs the archive. That someone out to make mischief edits their Facebook post after one of your employees has just replied “Great idea!” to make it look as if they are giving bad or misleading advice.
And then there’s the danger that someone else does remember what was said in a conversation and has the real-time archive to prove it.
While MiFID II may be forcing enterprises to reevaluate how they capture and archive electronic communications, with the right advice and technology it potentially offers not just a reduction in risk, but a strengthening of the overall compliance that underlines your business.