As first noted in a Regulatory Committee Bulletin in June 2008, the FSA's new rules on telephone taping and the recording of electronic communications come into force on 6 March 2009.
The new rules will apply to FSA-authorised private equity or venture capital firms which invest or deal in instruments admitted to trading on an EEA regulated market or on certain other UK markets, including AIM (and to OTC derivatives whose price is based on such instruments) ("quoted instruments"). Quoted instruments include listed shares, bonds and derivatives. They will also apply to advisor/arranger firms who arrange the execution of transactions in quoted instruments for their offshore investment manager client(s).
The rules require firms to take reasonable steps to tape calls and keep records of electronic messages about transactions in quoted instruments made by staff on equipment provided by the firm. Broadly, communications must be recorded where they "conclude", or are "carried on with a view to concluding", a transaction in quoted instruments unless an exemption applies. Tapes and records must be kept for six months from the date they are made, in a form which is readily accessible.
The BVCA Regulatory Committee has lobbied the FSA extensively about the rules. The FSA has sent a helpful letter to the BVCA in which the regulator explains its view of how the rules are likely to apply to private equity and venture capital firms. Member firms may find the views expressed by the FSA to be helpful, in particular when determining the whether they are able to rely on the exemption for discretionary investment managers. The FSA's letter is also helpful in clarifying which communications fall within the scope of the rules. The FSA's letter can be found here.
The new rules are appended to FSA Policy Statement PS08/1, available here
