Recording phone calls relating to client orders: what you need to know

From March next year, UK financial institutions will have to record phone calls relating to client orders.

Alexandra Harris, a legal consultant at computer forensics specialist Kroll Ontrack, and Paul Fontes, a partner at law firm Eversheds, look at how this will work in practice and the legal implications.

Under new rules introduced by the FSA, UK financial institutions will have to record and store telephone conversations and electronic communications relating to client orders. The rules, effective from March 2009, stipulate that information should be held on file for six months in an attempt to combat market abuse, particularly insider dealing and market manipulation.

Audio evidence can be a compelling proof in settlement discussions or at trial. When a sound recording is played for a jury, the jury not only hears the witness’ words, but the tone, expression and other subtle clues inherent in speech.  Further, some individuals may intentionally choose to leave “smoking gun” information in a voicemail instead of an email, believing it will be harder to trace.

Technical developments

The use of sound recordings as evidence has previously been restricted by the time and cost required to listen to them and convert them to text via transcription. Audio discovery technology is now making this process quicker and cheaper. It breaks audio data down into phonemes, the smallest components of human speech, before the resulting files are uploaded into online review software.

Speech recording technology is also progressing fast, making audio files more like email and file data every day.  For example, today’s computerised phone systems typically store voicemail recordings as digital sound files. These files can be saved, copied and preserved like other digital data files.

In addition, email and voicemail systems are converging.  Email is now accessible via telephone voicemail systems, and voicemail is now being sent to recipients by email. Voicemail systems used by businesses today send and store voicemail through a central computer system which converts the audio sounds into digital bytes. Accordingly, what began as an audio voicemail message may end up as an email attachment.

Employment law implications

For legal purposes “sound recordings” are now defined as a type of electronically stored information (ESI), subject to the same preservation and production requirements as other documents and ESI. There is an increasing expectation that a voicemail message will be routinely treated like any other document for evidentiary purposes.

The challenge is that organisations are not always aware of this. Employees are particularly unaware, and often no policy is communicated. The employer must be mindful of the risk that an employee may have the right to claim civil damages, if the company unlawfully monitors or records his or her telephone conversations.

The monitoring of employees’ communications is governed by legislation introduced in 2000. An employer should be aware that it can monitor employees’ calls if each employee has consented. It may also monitor employees’ calls for a lawful purpose, which includes:

  • obtaining facts relevant to the business
  • ensuring regulatory compliance
  • ensuring compliance with the law (e.g. investigating bullying and harassment claims)
  • checking trading and conduct standards
  • investigating unauthorised use of its telecommunications system.

In summary, telephone calls should only be recorded when an impact assessment concludes that it is appropriate and lawful to do so.  In any event, employers must take care to treat any recordings made as potential documentary evidence, not only for business purposes but also for use in a court of law.

Marc Barber

Marc Barber

Marc was editor of GrowthBusiness from 2006 to 2010. He specialised in writing about entrepreneurs, private equity and venture capital, mid-market M&A, small caps and high-growth businesses.

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