Legal Entity Identifiers

Certain investors who are deemed to be Legal Entities must obtain a Legal Entity Identifier (LEI) in order to continue to receive investment services  in line with the European legislation, the Markets in Financial Instruments Directive (MiFID II) and Regulation (MiFIR).

More information on the legislative background can be found on the Financial Conduct Authority’s website.

Key Things to Know About Legal Entity Identifiers (LEIs)

Certain investors who are deemed to be Legal Entities must obtain a Legal Entity Identifier (LEI) in order to continue to receive investment services in line with requirements from the Markets in Financial Instruments Directive (MiFID II) and Regulation (MiFIR) takes effect in the UK. More information on the legislative background can be found on the Financial Conduct Authority’s website.

1. Introduction
Certain investors who are deemed to be Legal Entities must obtain a Legal Entity Identifier (LEI) in order to continue to receive investment services after 3rd January 2018, when new European legislation, the Markets in Financial Instruments Directive (MiFID II) and Regulation (MiFIR) takes effect in the UK. More information on the legislative background can be found on the Financial Conduct Authority’s website.

2. What is a Legal Entity?
Although not specifically defined in the legislation, legal entities include Trusts (but not Bare Trusts), Companies (Public and Private), Pension Funds (but not Self-invested Personal Pensions), Charities and Unincorporated Bodies.

3. What is an LEI?
An LEI is a 20-character alphanumeric reference code that is unique to each legal entity.

4. Why do legal entities require an LEI?
The LEI is used as the identifier for the legal entity whenever it undertakes investment activity or an investment firm undertakes investment activity on its behalf in a reportable financial instrument such as equities and bonds. The unique LEI enables regulatory authorities in the UK and the rest of Europe to monitor trading activity with specific emphasis on market abuse and market manipulation.

This is a worldwide initiative Global Legal Entity Identifier Foundation (GLEIF) has overall responsibility for the LEI system. More information can be found at https://www.gleif.org/en/.

5. Who is responsible for obtaining an LEI?
The legal entity itself, not their investment firm(s), is ultimately responsible for obtaining an LEI but some investment firms may agree to apply for the LEI on behalf of their legal entity clients. If they agree to do so, the legal entity will be required to confirm in writing that they authorise the investment firm doing so. The London Stock Exchange (LSE) has produced a template which is available on request to enquiries@pimfa.co.uk. The investment firm may charge a fee for doing so in addition to the cost of the LEI itself (see paragraph 10 below).

 

6. What is the deadline for obtaining an LEI?
In order to continue trading from MiFID live date, legal entities must have obtained an LEI by 3rd January 2018. Legal entities can continue to apply for LEIs after that date and should allow time for their application to be processed and the LEI to be issued before trading.

7. What happens if the legal entity does not have an LEI?
Investment firms will not be able to provide the legal entity with investment services. The absence of an LEI means that investment firms will be unable to execute trades on behalf of the legal entity. Investment firms offering discretionary and advisory managed services, where they have accepted an obligation to monitor on an ongoing basis the suitability of the legal entity’s portfolio, will be forced to terminate their service as they are unable to take a decision to trade or make a personal recommendation. Consequently, the investment firm cannot meet their obligations to the legal entity.

8. Where can a Legal Entity obtain an LEI?
A list of LEI issuing organisations is available on the GLEIF website. These include the London Stock Exchange and the Irish Stock Exchange. Both websites outline the process to be followed and the documentation to be submitted.

9.  Is there a cost for obtaining an LEI?
Yes. The cost of obtaining an LEI will be available from the issuing organisation.

10. Does a Legal Entity have to renew its LEI?
On 2 August 2017, the FCA updated its LEI webpage to make clear that the requirement to renew an LEI on an annual basis applies to firms that are subject to MiFIR transaction reporting obligations.

11. I am a Legal Entity, what should I do next?
In the first instance discuss with your investment firm as to how best to obtain your LEI. If you have more than one investment firm you should contact all of them to ensure that you and they are clear as to who will obtain the LEI as only one LEI can be issued to each legal entity.

Information correct as of: January 2018

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