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Will you be Caught Out by the New Legal Entity Identifier Legislation?

With effect from 3 January 2018, certain investors who are deemed to be separate legal entities must obtain a legal entity identifier (LEI) in order to continue to receive investment services from their wealth managers. In terms of investment advisers this applies to all firms that are subject to the MiFID III transaction reporting obligations.

What is a legal entity?

Although not specifically defined in legislation legal entities include trusts (but not bare trusts) companies both public and private, pension funds (but not self-invested personal pensions SIPPs), charities and unincorporated bodies.

Who is effected in the pension world?

As stated above self-invested personal pensions are exempt as are generally small self-administered schemes (SSASs) with only one member. However, a good number of SSASs will be effected by this legislation.

What is an LEI?

An LEI is a 20 character alphanumeric reference code that is unique to each legal entity.

Why do legal entities require an LEI?

This is used as an identifier for the legal entity whenever it undertakes investment activity or an investment firm undertakes the investment activity on its behalf in a reportable financial instrument, for example, stocks and shares and bonds. This unique LEI enables regulatory authorities in the UK to monitor trading activities with specific emphasis on market abuse and market manipulation.

Who is responsible for obtaining this?

The legal entity itself is ultimately responsible for obtaining the LEI, but some investment firms are already applying for these on behalf of their clients. They however require confirmation from their clients that they are happy for them to do this on their behalf.

What is the cost of an LEI?

Generally speaking, this is £115 subject to VAT with an annual charge of £70 plus VAT. However, some firms requesting bulk allocation will get a discount on this price, and therefore your investment managers may be offering such a service.

Where can this be obtained if my investment manager is not doing this?

There is a list available at the Global Legalising Identifiers Foundation which includes the London stock exchange at hpps;//www.gleif.org/en/about-lei/how-to-get-an-lei-find-lei-issuing-oranizations.

What information is required in order to obtain a legal entity identifier?

The official name of the legal entity

  • The formation country
  • The legal form of the entity
  • The current address of the headquarters of the legal entity
  • The current address of legal formation of the legal entity
  • The official business registry where the foundation for legal entity is mandated to be recorded on the formation of the entity where applicable
  • The reference in the official business registry to the registered entity where applicable, e.g. company registration number
  • Supporting documentation can also be submitted such as articles of incorporation, trust agreement, fund offering document and prospectus

What happens if the legal entity fails to obtain an LEI by 3 January 2018?

Quite simply investment firms will not be able to provide them with investment services. They will not be able to conduct trade and would effectively be forced to terminate their services since they would be unable to continue with the discretionary service generally offered.

What should I do if I have a SSAS with more than two members on which I am receiving investment advice?

We would suggest that in the first instance you contact your wealth manager/investment advisers to see if they will be obtaining LEIs on your behalf under the bulk application discount.

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