The Central Bank of Ireland recently conducted a Conduct Risk Assessment of Telephone and Electronic Communications in the securities market. This crucial assessment aimed to evaluate compliance with the Markets in Financial Instruments Directive (MiFID II), especially Article 16(7), which mandates firms to prevent the use of unauthorised communication.
The Bank expressed concerns about communication device usage in hybrid work settings, it said. Its policy objectives include mitigating market abuse risks through authorized communication methods and maintaining accurate records for compliance and dispute resolution. The shift to hybrid and remote work necessitates that firms adapt their policies and monitoring systems for new communication methods, ensuring authorization before use. Keeping precise records is vital for demonstrating trading intent and compliance with various market obligations.
Key findings from the assessment include:
- No firms revised communication policies or procedures for remote/hybrid work.
- Monitoring and testing did not meet the Central Bank’s standards, with insufficient electronic communication lexicons and inadequate telephone monitoring.
- Few breaches were identified, indicating ineffective monitoring systems.
- Inconsistent disciplinary procedures, often concluding breaches without clear rationale.
- Positive practices observed, like recording all communications, providing corporate devices, and maintaining IT infrastructure for record-keeping.
Firms are encouraged to continually reassess and enhance their communication policies and monitoring frameworks, adapted for hybrid work. Approving new communication methods before business use and maintaining comprehensive records are emphasized for effective trading, compliance, and dispute handling.
Custodia’s CC1 service provides robust capturing, reconciling, and monitoring of communications, suitable for both office and remote environments. It addresses hybrid work challenges by offering advanced reconciliation features and near real-time alerts, aiding in effective record-keeping and identifying policy violations or suspicious activities. CC1’s integration with surveillance, behavioural analytics, and machine learning partners enhances communication monitoring capabilities.
Read the report here.
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