The original ‘Markets in Financial Instruments Directive’ (MiFID) sought to remove barriers to cross-border financial services within Europe for a safer, more transparent and evenly balanced marketplace as a whole. Extending these transparency requirements, MiFID II will have an even more pronounced impact across the landscape and as part of the MiFID II from 3rd January 2018, financial firms subject to MiFID II transaction reporting will only be able to transact business for entities that have an LEI.
What is an LEI:
An LEI is a unique identifier for persons that are legal entities or structures including law firms, companies, charities, trusts etc. The obligation for legal entities or structures to obtain an LEI was endorsed by the G20.
The purpose of an LEI:
An LEI is a code unique to that legal entity or structure. When an LEI code is allocated to you, the code is included in a global data system. This enables every legal entity or structure that is a party to a relevant financial transaction to be identified in any jurisdiction.
The cost of an LEI:
Applications can be made online to the London Stock Exchange (LSE), for which the name, address and certain supporting data and documents will need to be provided. If you are a trust applicant (and not a bare trust) you are likely to need to provide the trust deed as part of the application. There is an initial allocation cost of £115 + VAT and an annual maintenance cost of £70 + VAT. The LSE aims to turn around applications in 1-3 working days.
Should you have an LEI:
LEI’s are available to legal entities, which here means a unique party which is legally or financially responsible for the performance of financial transactions or have the legal right in their jurisdiction to enter independently into legal contracts regardless of how they are constituted. Eligibility for an LEI does not necessarily mean that an entity has to register for one.
At present there is much debate within firms on whether certain entities require an LEI such as law firms that purely transact share disposals for estates. It is argued that estate accounts are not an Entity (no LEI) as underlying the transaction is an individual who is clearly not acting in a business capacity (i.e. the deceased). Where a law firm is acting for trusts on the other hand, then each trust ‘will’ require an LEI.