The regulator has proposed extending the requirement of telephone taping to advisers as part of plans for implementation of the revised Markets in Financial Instruments Directive.
The regulator said the change would be aimed at “providing benefits to both firms and their clients in resolving disputes in a quick and cost effective manner”.
The FCA report stated: "We propose to apply a taping regime to all Article 3 firms (Article 3 firms largely comprise of financial advisory firms and a smaller number of corporate finance boutiques).
"This is because based on information from the Financial Ombudsman Service the majority of complaints about investments centre on the conversations that happened when they are sold.
"We think taping conversations between firms and their clients is likely to be an effective way of advancing our consumer protection objective.
"However, we remain open, particularly for smaller financial advisers, to considering whether an alternative approach could help us to achieve a similar level of consumer protection in this area as taping but at a lower cost for firms."
In a statement, it said: “We are open to receiving and exploring suggestions on alternative proposals for smaller financial advisers.”
The proposal is contained in a third consultation paper on MiFID II, released this morning.
MiFID II introduces for the first time an EU wide minimum harmonising requirement on firms to
record telephone conversations and electronic communications when providing specific client order services that relate to the reception, transmission and execution of orders, or dealing on own account.
Under the heading 'Recording of telephone conversations and electronic communications (taping)', the report states: "We propose to update our current taping rules with the changes required by MiFID II.
"We are proposing that discretionary investment managers be fully subject to the requirement to tape, and the taping requirement applies to corporate nance business.
"Also our view is that taping should be extended to Article 3 firms but we are open to considering other proposals to address consumer protection concerns in this area."
Other key proposals of the consultation paper include:
• Strengthening inducement and research rules to drive better competition and ensure research is only produced and consumed where it adds value to investment decisions.
• Implementing requirements of full disclosure of costs and charges.
• Guidance on the responsibilities of providers for the fair treatment of customers.
Andrew Bailey, chief executive at the FCA said: “Strengthening consumer protection is one of the key aims of MiFID II and this aligns with, and advances, our own statutory objectives.
"The changes to rules we are proposing today reflect key themes that we have worked on in both retail and wholesale markets over recent years to promote competition and market integrity.
“As we said in our statement following the EU referendum result, firms must continue to abide by their obligations under UK law including those derived from EU law. They must continue with implementation plans for legislation that is still to come into effect, of which MiFID II is one such example.”
The third consultation is open until 4 January 2017, except for comments on Chapter 16 - Supervision manual, authorisation and approved persons - which should reach the FCA by 31 October 2016.
A fourth consultation paper is likely to be published towards the end of this year.