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Changes to UK FSA Code of Business Conduct Brings Audio Recordings into the eDiscovery Mix

Not too long ago, we can recall checking our voice messages and finding 30 to 50 messages in our respective inboxes every day. We would listen to them and then delete some or all of them, making notes along the way until we reached the end of the mailbox. While some of the messages were irrelevant, some were very important in that they conveyed corporate direction or pseudo-contractual agreements. Given that same scenario today in the financial industry, companies need to exercise extra caution as regulatory agencies and courts heighten requirements for companies to make documents of any type available, including audio recordings (telephone messages, voice mail, etc.).

To date companies have put audio aside because they lack a means to efficiently handle them and the SEC has been lax in its enforcement by not always requiring companies to produce “any type” of audio recordings as its own rules state. But that tide is changing, at least overseas, as new regulations are creeping into the UK that will require more visibility into this piece of electronically stored information (ESI).

The UK Financial Services Authority (FSA), given statutory powers by the Financial Services and Markets Act 2000, in the Policy Statement 08/01: Financial Services Authority – Telephone Recording: recording of voice conversations and electronic communications, March 2008 – has published new rules that require the recording and retention of all telephone conversations and electronic communications.

The new rules go into effect in March 2009 and apply to all firms that receive client orders and negotiate, agree and arrange transactions across the equity, bond and financial commodity and derivatives markets. Some leniency in the original draft now excludes cell phones from being recorded and reduces the retention of audio from 3 years to 6 months in these circumstances. Equally important to note, the FSA can request tapes and records beyond the 6 month period if an investigation begins. Therefore, firms are advised to exercise diligence in destroying their old tapes and records in a timely manner.

While there is for now still a clear distinction between audio retention requirements in the UK and the US, companies in the US still need to be on their toes. Any time a US company calls, or is called by a company in the UK, the US company must be aware that they are being recorded by their counterpart in the UK. And this law does not just apply to UK-based companies. If a US-based company has an affiliate in the UK, then it is required to tape all conversations between the two. Initially this law will encompass all major US banks and, as we have seen before, once implemented in the financial institutions the private sector is next.

As these new regulations take effect in the UK, the US can expect two outcomes in the near term.

  • First, do not be surprised if the SEC follows the FSA’s lead and more rigorously enforces the laws it already has in place by requiring companies to produce audio recording during routine audits. While not extensive, a simple search at quickly shows a good handful of cases.
  • Second, expect other US legislative bodies and enforcement agencies to pass similar laws as the SEC’s that require companies to produce audio recordings during eDiscovery process. This will force US companies to implement technologies such as Autonomy’s IDOL platform that they can scale and deploy across their entire enterprise.

While the requirements to access, search and produce audio recordings is still in its early stages and not yet a prerequisite for most corporate eDiscoveries, the requirement to do so is moving closer, not further away. UK’s new FSA law already puts a stake in the ground for English financial services firms and those in the US doing business with UK to comply by March 2009.

To meet these obligations, companies need to act now in order to put in place comprehensive solutions that go beyond existing textual electronic communications, keeping in mind that the shift in using Unified Messaging Systems (UMS), where messages will exist in any format, must be contended with. The challenge will be to capture audio regardless of recording technology, store the explosive volume of data and then provide intelligent searching to produce relevant information found in the recordings in a timely manner.


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