Skip to main content

So, what is a Legal Entity Identifier (LEI)?

The Markets in Financial Instruments Directive II (MiFID II) comes into force next year, with one of its key objectives being market transparency. This will see a new section added to the FCA Handbook which refers to the requirement to make transaction reports to the FCA with regards to certain financial instruments. These reports have to be completed for all clients and, where the client is not a natural person (i.e. an individual), it will need confirmation of their Legal Entity Identifier (LEI).
An LEI is a unique identifier for a client which is a legal entity or structure.

Which clients need a Legal Entity Identifier (LEI)?

Most commonly clients of an advice firm, these will include:
  • Companies (public and private)
  • Charities 
  • Trusts (but not bare trusts) 
A natural person (including sole traders and partnerships) does not require a LEI as their national insurance number will identify their involvement in the purchase of a financial instrument.

What types of financial instruments need to be reported?

The range of instruments is extensive but other than more complex instruments, such as derivatives, options, futures, warrants, bonds, swaps, etc. the most common instruments likely to apply include:
  • Shares (in listed or unlisted companies) traded on a regulated market
  • Investment trusts
  • Exchange traded funds 
Perhaps more importantly, it should be noted that not all MiFID financial instruments are included, as the transaction reporting rules do not apply to units in a collective investment scheme (as the client does not hold the underlying instrument under their title). Therefore, an LEI is not required for a legal entity investing solely in collective investment schemes i.e. ISAs, OEICs, General Investment Accounts. For the avoidance of doubt, investment bonds and insured pension schemes are not covered by these requirements as they are not MiFID instruments.

What action should you take?

If you have a client that is a company, trust or charity, they will require an LEI where you recommend one of the financial instruments listed above. Failure to hold an LEI will mean they will not be eligible to complete the transaction. You should therefore identify any clients that will be affected by the forthcoming requirement. On informing them, you may also wish to support them with the application process.

Should you refer any client that may require an LEI to a discretionary investment firm (DIF), you should seek clarification from that DIF to ascertain their position on carrying out transactions in financial instruments that will require your client to hold an LEI. Again, you may wish to assist your client in the application process. In both the above scenarios you should consider the suitability of the recommendation of certain financial instruments based on the additional cost of holding an LEI (see section below). This requirement applies from 3 January 2018 onwards.

How to obtain an LEI?

An LEI can be obtained directly from the London Stock Exchange (LSE) for an initial fee of £115 plus VAT, with an annual renewal fee of £70 plus VAT. The LSE have issued a step by step guide on requesting an LEI which can be accessed on the London Stock Exchange website.
Location: St Nicholas Court, Church Ln, Dersingham, King's Lynn PE31 6GZ, UK

Comments

Post a Comment

Popular posts from this blog

Budget 2021 – Small Business Owners

The planned increases to Corporation Tax Rates and what these mean for small business owners. Who will be affected? The corporation tax ‘main rate’ (currently 19%) is scheduled to increase considerably to 25% by April 2023. A new ‘small profits rate’ is also being introduced for business which make less than £50,000 profit a year. The main rate will be applied to businesses making more than £250,000 profit a year, with a ‘tapering’ of the two rates between these amounts.  Those companies under this lower £50,000 threshold will find themselves relatively unaffected by the new measures.  Businesses which find themselves between these rates will arguably be affected worst, having smaller profits to pay the extra tax from. For these companies, particularly which find themselves just over each of the limits announced, or indeed the tapering limits yet to be confirmed; additional tax planning will become an essential exercise going forward. Fortunately, these same companies will have more op
Read more

Newsletter - Budget 2021

Here is a roundup of the Chancellor's 2021 Budget from yesterday. Finance & Taxation Pension Lifetime Allowance to be frozen Pensions to have access to ‘green investments’– FCA consultation to follow shortly No changes to rates of income tax, national insurance or VAT Personal income tax allowance to be frozen at £12,570 from 2022 - 2026 Higher rate income tax threshold to be frozen at £50,270 from 2022 – 2026 Stamp duty freeze extended for a further three months in England and Northern Ireland After this date, the starting rate of stamp duty will be £250,000 until the end of September. Stamp duty will then return to the usual level of £125,000 Corporation tax on company profits to rise from 19% to 25% in April 2023, with a taper Rate to be kept at 19% for about 1.5 million smaller companies 95% Mortgages The UK’s biggest lenders will be offering 95% mortgages guaranteed by the government from next month to help buyers with small deposits get on or up the property ladder. Sunak
Post a Comment
Read more

Why are CPD and Qualifications important to us and our clients?

Continuing Professional Development (CPD) is activity undertaken to ensure our skills and knowledge are up-to-date. The Chartered Insurance Institute member CPD scheme provides a practical framework for ensuring development is addressed in a structured way to meets our personal and business needs and requirements of the CII as a Chartered professional body. CPD is a common requirement for qualified members of professional bodies. It reflects the fact that, in today's fast changing world, knowledge gained through qualifications quickly dates and, if you are to remain competent, you must continue to develop and enhance your knowledge. Equally, eligibility for and use of member qualification designations is not simply an indicator of study completed, but also of a commitment to subsequently keeping this knowledge current and being bound by a Code of Ethics. We believe it is essential to be part of this CPD programme and go beyond in studying CII modules, this allows us to: Build publi
Post a Comment
Read more